Mill economics: margin, break-even and what to improve

A sawmill is a price taker on both sides: it buys logs and sells timber at prices it does not set. The margin is the difference between two numbers the mill does not control, so the levers it does control (recovery, mix, utilisation, cost) matter a great deal. Open mill-level cost data is thin; the studies below show structure, not current benchmarks.

What the open studies show

Cost shares use different denominators (total cost versus production value), so the Swedish 63% and the German 41.5% cannot be compared directly. Finland's 2021 result was a price spike, not a new normal.

The margin squeeze

Log cost per cubic metre of sawn output equals the log price divided by recovery. At 50% recovery, one euro more on the log is two euro more per m³ of sawn timber. A squeeze occurs when logs become dearer faster than sawn timber.

Worked example (invented numbers, not data)

100,000 m³ logs a year, recovery 50% (50,000 m³ sawn), capacity 62,500 m³ sawn, log price 100 euro/m³, sawn price 260, residue revenue 24 per m³ sawn.

• Revenue: 260 + 24 = 284 euro per m³ sawn
• Variable costs: logs 100 / 0.50 = 200, energy 15, consumables 6, logistics 8, total 229
• Contribution = 284 - 229 = 55 euro per m³
• Fixed costs 53 per m³, so result = 2 euro per m³, or 100,000 euro a year

Break-even volume = fixed costs / contribution = (53 x 50,000) / 55 = 2,650,000 / 55 = about 48,200 m³, which is 96% of planned output and 77% of capacity.

Log price shock. +5 euro per m³ of logs adds 5 / 0.50 = 10 euro per m³ sawn. Contribution drops to 45, the result becomes -8 euro per m³ (a loss of 400,000 euro), and break-even rises to 2,650,000 / 45 = about 58,900 m³, or 94% of capacity.

Recovery gain. Recovery 50% to 52% yields 2,000 m³ more sawn timber from the same logs. Each extra cubic metre earns 260, costs about 29 more in energy, consumables and logistics, and displaces about 24 of residue revenue: 2,000 x (260 - 29 - 24) = 414,000 euro, about four times the base profit.

Working capital. 60 days of finished stock at 250 euro/m³ on 50,000 m³ a year: 12.5 million x 60 / 365 = about 2.05 million euro. At 6% financing, interest is about 123,000 euro a year, more than the whole base profit.

Utilisation and operating leverage

Fixed costs are paid whether or not the line runs, so at high utilisation each extra cubic metre carries a large contribution. If fixed cost is 53 euro per m³, raising volume by 10% cuts it to about 53 / 1.1 = 48.2 euro, about 9%. Keep apart: capacity utilisation, throughput at the true bottleneck, and uptime.

Residues are a revenue line with their own cycle: Polish pallet-lumber data show chips about 20-30%, sawdust 10-15% and bark up to 8% of input.

Checklist: first improvements

1. Attack recovery and sawing variation first.
2. Match sawing pattern to log and product.
3. Check log price against recovery: the squeeze multiplies by 1 / recovery.
4. Keep stock days and financing cost visible.

Limits of this course

This course is AI-drafted and based only on the portal's already fact-checked articles on machinery, log supply, yield and economics. Figures differ in region, year, definition and source quality: several are old (1970s to 2000s), come from simulations or small samples, or from trade press, and the worked example above uses invented numbers. Drying, planing and safety are not covered. Always check figures against current standards, your contracts and your own mill data before acting on them.

Key points

• Log cost per m³ sawn = log price / recovery; at 50% recovery a 1 euro log rise costs 2 euro per m³ sawn.
• Break-even volume = fixed costs / contribution per m³.
• Recovery gains can be worth several times the base profit in a thin-margin mill.
• Stock and financing can equal or exceed the whole profit.
• Open studies show thin margins and different cost bases; use them as structure, not benchmarks.