Griefina —

spreadsheet

“-5. sae--ar erby Squish sat in his
- H dimmed office, face glued

to his computer screen.

"Well, Mr. Jovial," he whispered.

"If this doesn’t knock your socks

off, I’ll be an independent busi-

nessman once more.”
Herby Squish had several tables

~ taped to the wall, tables that taken

together told a dramatic tale. The

. ~ first was labelled: "Scenario #1 — .
-. Harvest according to your timber

profile." This was his personal
choice... A prime example of good
management practices. The second
told a different story... One Squish
liked to call the five-year glut. It
was labelled: "Scenario #2 — Log

-. all the best timber first." And the

third... Well itclearly demonstrated
the result of Scenario #2. It was
labelled: "Scenario #3 — Log what

"you have left after the glut."

And then there was a fourth. It
compared Scenario #1 to the com-

bination of Scenarios #2 and #3

and demonstrated that many of the

. big dollars made in the first five

years of high grading would be
lost in the next 15.

These tables had failed to con-
vince Jovial that high grading was
a bad idea, though. And the
spreadsheet currently in the brain
of his computer would tell a much
more realistic story. In Scenario
#3, Squish had simply averaged
the final 15 years of Jovial’s 20-
year forest tenure. But the spread-
sheet took all factors into account
and drew a picture of declining
profils and eventual disaster.

The first two columns listed the
years, five through 20, and the net
profit, beginning with the botiom
line at the end of five years or
high grading (Scenario #2), and
tracing the annual drop in retum at

a very predictable rate — around
11 percent due to the declining
quality of wood fibre. The picture
wasn’t that bad, Squish thought.
Jovial wouldn’t lose money.

But there were other factors to be
considered, and one of those fac-
tors was found in the next two
columns. As the quality of timber
declined, the cost of manufacturing
lumber would rise. Wear and tear
on equipment, sharpening or re-
placing saw blades... It would add
up, and costs would rise at about
five percent a year.

This is a little more convincing,
Jovial decided. The net profit now
declined much more rapidly. In
fact, in the 13th year Jovial would
only realize a net profit of around
$100,000... And then he would
start going in the red. His total
loss over the fifteen year period
would run around $7.52 million.
Jovial might question that, but he’d
still be willing to risk it.

And there was more. The last
two columns considered the last
straw: the rising cost of getting at
and transporting logs that
worsened in quality each year.
Roads would be longer, over
steeper terrain, and haul distances
would soon reach the point at
which it would no longer pay to
even load them on the truck.

"Yeah. This should do it," Squish
said with a smile. "Milton. In year
six you might make 3450,000...
But in year seven you can expect
to start losing. By the ninth year,
in fact, you can expect to lose a
million plus each and every year.
Over the final 15 years of your 20-
year tenure, you can expect to lose
about $36 million... If you stay in

— Continued on page 8

Letters to the Editor

Another view of
Christy Park plan

To the Editor;

Regarding the Christy Park
washroom-changeroom facility,
common sense must prevail over
aesthetics and dollars when it
comes to selecting a location.
Concealing the facility behind
trees on the north side of Howe
Creek may seem an attractive op-
tion, until one considers the
prospect of a five-year-old child
trekking across vast soccer fields
to a hidden toilet in the woods.
This secluded area already holds
enough attraction for covert activ-
ities, without the additional bait
of an unsupervised washroom.

Alternative site #1, located at
the fur north end of the Sparks
Street parking lot, isd more lugi-
cal chuice for erecting this facili-
Iv. Hesides the obvious conve-
nienee for users, (he. suliny of

parents and coaches would ensure
the safety of small! children
requiring a mid-game washroom
visit. The initially higher cost of
servicing this site is well worth

the security, convenience, and the
preservation of a “family” neigh-
bourhood in years to come.

We strongly recommend that
city council, the recreation
department and the soccer club
consider this proposal, as the
voice comes from those most
effected: parents of soccer pliy-
ers, parents of children who work
and play in nearby Parkside
School, and people who live in
the surrounding area.

Anna Beddie,
Chairperson,
_-.... Parkside School Parent
Advisory Commiltec.

logging a representative cross

Terrace Review —— Wednesday, October 2, 1991 7

by Tod Strachan, in consultation with Rod Amold and Doug Davies

in his efforts to persuade timber baron Milton Jovial that high grading — cutting all the
best timber first for quick profits — is not only unsound from a forest management point
of view but also bad economics, forester Herby Squish set up the following spreadsheet
tables. The first shows an unspectacular but steady annual return over 20 years by
-section of the timber on Jovial's licence each year. The
second shows a higher profit for the first five years if high grading
but the third shows a significantly lower profit for the following 15 years. The fourth
compares the annual average profit over 20 years of both management models.
_ But for the table that really got Milton's attention, turn to the next page, where Herby
factors in all the hidden costs of high grading.

is the chosen method,

LOGGING THE TIMBER PROFILE FOR 20 YEARS (Scenario #1)

Percentage of Profit/cubic Production/Quarter Profit/Quarter
Lumber Grade All Lumber Metre (cubic metres} (estimated .
Production average)
High 15 $200.00 5,940 $1,188,000
2's. 50 $11.00 19,800 $217,800
#3's, Export 20% Maximum 15 —— $30.00 5,940 —— $178,200
43's, Finger Jointed 20 $260.00 7,920 $2,059,200 |}
#3's, Chips 0 ——— $32.50 0 0 |

dD
Te

Regular Chip gales | |
Net profit $665,000 ?
VE YEARS © H GRADING (Scenario #2)
High
#2's 35 $11.00 15,120 $166,320 |
#3's, Export 20% Maximum 20 — $30.00 8,640 —— $259,200 |
#3's, Finger Jointed 9 $260.00 3,888 $1,010,880 |
#9's, Chips — $32.50 2,592 — $34,200 |
Gross Profit 100 43,200 $3,425,760 :
Regular Chip Sales — $2,536,500 |
Net Profit $889,260 |;
N YEARS OF POOR QUALITY TIMBER (Scenario #3) |
$200.00 $534,200
#2's 51 $11.00 19,462 $214,082
#9's, Export 20% Maximum is | —$30.00 5,724 $171,720
#3's, Finger Jointed 25 $260.00 9,540 $2,480,400
#3’s, Chips 2 —— $32.50 763 $24,798

Gross Profit 100 38,160 $3,032,164

Regular Chip Sales

COM PARING

Net Quarterly

Scenario Profit

$889,260

Net Annual
Profit

$3,557,040

—— $2,656,000 _ |:

re

Term of Licence

(Years)

THE BOTTOM LINES

Net Profit for
Term of Licence

$17,785,200

$2,660,000

Average Annual
Net Profit

$3,557,040

3 $376,164

$1,504,656

$22,569,040

$1,504,656

$40,355,040

"$2,017,752

ee ee