Page 7 - RosboroAR2017

Mill B (the stud mill) had a fantastic 2017 with lumber prices in excess of $400/mbf for the majority of the year. This operation primarily ran two 8-hour shifts for the entire year, in an e ort to maximize pro tability. Manufacturing costs came in 8% more than forecast, primarily relating to extra maintenance work done in preparation for the installation of our new HewSaw small log line that ran its rst logs through in November. Log costs on a log scale basis came in $51/mbf (8%) higher than budget, but our log recovery was 5 points better, resulting in log costs on a lumber scale basis only $16/mbf (6%) o target. Taking advantage of strong Hem Fir markets were key to driving our log recovery up during the year as we produced 30% more Hem Fir than we had budgeted for at a log recovery rate of 2.61, which typically yields 15 points better recovery than Douglas Fir. We wouldn’t have been able to chase this market had we not installed 2 new double track dry kilns in July, since all Hem Fir studs need to be dried before sold. This was vital for Rosboro, because the Hem Fir material margin
CAPITAL SPENDING: After a quiet 2016, this year saw us nish two major capital projects. The rst project, completed in July, was the installation of two double track kilns. This was done for several reasons; rst it provides the exibility to dry more volume of studs to take advantage of any price premiums for dry lumber and secondly as a defensive measure against the California green stud market shrinking. As mentioned above, the new drying capacity also a orded the company the unique opportunity to substantially increase our production and sale of Hem Fir products that had signi cantly better margins in 2017. Hem Fir studs were 19% of total stud sales in 2017 compared to just 2% in 2016.
The second major capital project completed was the introduction of a small log line at Mill B. This project provides many advantages over the old log line in that it 1) can process a log block with a diameter down to 4” 2) is a one process lumber production center, eliminating the need for additional
machine operations further down the line, such as board edgers, etc. 3) can run 50% more blocks per minute than our old system and 4) enabled us to eliminate signi cant labor costs in the process. The
net e ect of the project was approximately 22% increase in production with a 6% reduction in labor costs. The rst logs ran through the new machinery during November and we are pleased with the progress we have made so far in pushing our production output upwards and in fact signi cantly beating our original estimates for productivity. The ability to source a
outpaced the Douglas Fir material margin due to the high cost of Douglas Fir logs in the region. For the year, Mill B generated a gross margin of $6.6 million, 104% more than what was budgeted.
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