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Housing supply chain: Loggers’ sales improve but profitability slips

Mary Ellen Biery
November 21, 2012
Read Time: 0 min

Privately held logging companies have experienced healthy sales increases amid encouraging signs in the U.S. housing market, but their profit margins are weakening, according to preliminary industry estimates by Sageworks.

“Sales have started to grow fairly decently,” Sageworks analyst Tim McPeak said. “At the same time, net profit margin has never been high, but it has really gotten thin in the last 12 months.”

Preliminary estimates from Sageworks’ financial statement analysis show that sales among privately held logging companies (NAICS code 1133) increased nearly 13 percent over the last 12 months. That’s a solid increase after the rebound they experienced in 2010 and 2011, which followed a nearly 14 percent drop in 2009, he added.

But after rebounding in 2010, average net profit margins for the private logging companies in Sageworks’ database have been falling. Net margin was about 1.6 percent in 2011 and dropped to 0.28 percent, or near the break-even point, during the last 12 months, according to the industry benchmarks.

“The health of that industry is really important, especially as we see the housing market recover,” said Suz-Anne Kinney, communications manager for consulting firm Forest2Market, Inc. of Charlotte, N.C. She said there’s significant worry among industry leaders that the U.S. logging industry will not have a sufficient number of loggers to produce enough lumber to sustain the construction of 1.1 million to 1.3 million houses a year. Census Bureau data shows that the number of private-industry logging companies fell to 9,248 in the first quarter of 2012 from 12,444 in 2003.

McPeak said it’s unclear what’s driving logging companies’ margins lower. But Kinney said timber prices since 2006 have been relatively flat while the cost of logging equipment has gotten “exponentially more expensive” and fuel costs have jumped. Many loggers have received price adjustments related to fuel costs, but overhead costs such as insurance (workers’ compensation, unemployment, etc.) have also risen. And smaller companies with one or two crews may be finding it hard to achieve economies of scale, given fluctuating demand, she said.

See the graphic and more on Sageworks’ latest data here

About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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