BC Timber Sales QUARTERLY PERFORMANCE REPORT

Transcription

1 BC Timber Sales QUARTERLY PERFORMANCE REPORT for the period April 1 to December 31, 2012 Fiscal 2012/13

2 Library and Archives Canada Cataloguing in Publication Data BC Timber Sales. Quarter... performance. Quarter 3 (April 1/December 31, 2012)- Quarterly. Running title: BC Timber Sales quarter... performance. ISSN = Quarter... performance (BC Timber Sales) 1. BC Timber Sales - Periodicals. 2. British Columbia - Marketing - Periodicals. 3. Logging - Government policy - British Columbia - Periodicals. I. Title. II. Title: BC Timber Sales quarter performance. HD9764.B7B C X ii

3 TABLE OF CONTENTS Introduction... 1 Performance Highlights... 2 Credible Reference Point... 5 Reliable Supply... 6 Net Revenue... 7 Appendix 1 Outputs... 9 Appendix 2 Financial Performance Appendix 3 Key MPS Variables Distribution Comparisons Interior and Coast iii iii

4 INTRODUCTION BC Timber Sales (BCTS) presents its third quarter performance report for 2012/13. Quarterly performance reports are a key part of the BC Timber Sales Performance Management and Accountability Framework. Business Goals BC Timber Sales has four business goals: Business Outcomes BC Timber Sales principles and goals support the following outcomes: Consistent with safe practices, sound forest management, and maintaining effective relationships BC Timber Sales Increased safety awareness and a culture of safety in all its practices and operations. BCTS is recognized as demonstrating sound forest management Mutually beneficial working relationships between BCTS and its stakeholders 1. Is a high-performing organization with skilled, motivated and proud people. 2. Provides a credible reference point for costs and pricing of timber harvested from public land in B.C. 3. Provides a reliable supply of timber to the market, through open and competitive auctions subject to meeting the requirements of cost and price referencing stated in Goal Maximizes net revenue for the Province subject to the requirements of cost and price referencing stated in Goal 2 and supplying timber for auction stated in Goal Long term success of BCTS. 2. The province s timber Market Pricing System and the Softwood Lumber Agreement with the USA. 3. Rural economies, jobs and families. 4. Maximum value for asset and net revenue to support government priorities. Key Outcome Indicators The success of BCTS in achieving its business goals is measured through three key outcome indicators. BC Timber Sales timber volume advertised as a percent of projected provincial harvest volume. Volume of timber sold. Net revenue earned. 1 1

5 QUARTERLY PERFORMANCE HIGHLIGHTS Overall Performance: Summary of Highlights BCTS earned $4.6 million in net revenue in the third quarter and is on target to earn $19.1 million for the year. Some delays in development have adversely impacted quarterly performance but are not anticipated to impact year end performance. BCTS is projecting to advertise 87% of its apportionment and sustainably achieve both its volume offered and sold targets for the year. Internal capacity challenges and supplier shortages are beginning to adversely impact production of developed volume which increase the risk of not having sufficient developed volume to achieve targets in 2013/14 and beyond. Safety: Summary of Highlights BCTS continues to maintain its SAFE Company Certification and collaborate with industry through the BC Forest Safety Council to promote the achievement of safe and healthy workplaces within the ministry and the forest sector. BCTS is in the process of implementing recommendations for improvement that were developed during the 2012 Safety Management Review Forest Management: Summary of Highlights BCTS currently has 100% of its apportioned volume certified to one of three major forest certification standards (CSA, SFI and FSC). In the third quarter: The Prince George Business Area (TPG) recertified its operations to the SFI Standard under the BCTS provincial SFI multisite certificate. TPG was previously certified to CSA. The SFI certification includes TPG operations in the Robson Valley TSA and TFL 53 which were previously uncertified. The Stuart Nechako Business Area (TSN) is recertifying its operations to the SFI Standard under the BCTS provincial SFI multisite certificate in the coming months. Plans are to be recertified before May 31, TSN is currently certified to CSA. The Coast Forest Conservation Initiative (CFCI) Forest Stewardship Council (FSC) certification of which BCTS Seaward-tlasta BA (TST) is a member was re-suspended as of November 30, CFCI was unable to convince the auditor (Rain Forest Alliance) that the outstanding Correct Action Request should be closed. TST staff are taking the necessary actions required under the suspension. This suspension is not a reflection on our operations within this area which BCTS believes to be of the highest degree of quality and that we are practicing sound forest stewardship. It is rather a matter of how the standard is interpreted by the auditor as well as the CFCI group for how we engage with the public. BCTS continues to actively engage with industry and government colleagues in a number of forestry initiatives such as Ecosystem Based Management, Forest Certification, EMS, Species at Risk Management, Forest Carbon Offsets and Climate Adaptation

6 QUARTERLY PERFORMANCE HIGHLIGHTS High Performing Organization: Summary of Highlights A number of activities contributing towards excellence in people and processes were underway during the quarter. An Organizational Development Review was initiated in partnership with the Public Service Agency Business Consulting group. A report focusing on recruitment and retention challenges with recommendations is expected to be completed by end of March. Three sessions of contract (PCMP) training were delivered by BCTS staff experts in Vernon. BCTS continues to be on track to have 90% of people having completed all required contracting courses for their positions as set out in its contract training matrix by year end. Working Group Review completed; final report with recommendations expected by end of March. The Opportunities Review Draft Report was provided to the Timber Sales Leadership Team. The focus over the next several weeks will be on finalizing the report and preparing an implementation strategy. Once final the report will be approved for broader distribution. The Timber Sales Leadership Teamed also approved the BCTS Lean Framework and Strategy. Implementation has begun with the BCTS Lean Lead and facilitator development complete. In addition, BCTS was requested by the PSA to be part of the Government Lean Training development team and are collaborating on the development of Lean training courses for BCTS and broader government. The BCTS Lean team also delivered an Instructional Skills Workshop in Richmond to build internal capacity for Lean facilitation with participants from BCTS, Compliance & Enforcement, Ministry of Social Development, and the BCPSA Lean Project Office. BCTS has also been approved to deliver PSA Lean training internally to meet our needs. 3 3

7 QUARTERLY PERFORMANCE HIGHLIGHTS Effective Relationships: Summary of Highlights Effectiveness in building and maintaining strong relationships is critical to delivering superior, enduring performance. BC Timber Sales has developed a number of service and good neighbour agreements across the province in order to specifically strengthen relationships with First Nations. Since the last reporting period the Cariboo-Chilcotin Business Area entered into a joint Forest Stewardship Plan agreement with the Unlatch First Nation on their Non-replaceable Forest Licence. Further discussions on business agreements are underway in the Cariboo- Chilcotin, Chinook, Strait of Georgia, Skeena and Seaward-Tlasta Business Areas. BC Timber Sales continues to explore opportunities to meet First Nations, other communities and BC Timber Sales interests on the forest land through the continuation of existing partnerships and piloting of additional opportunities. BCTS partnership with the BC First Nations Forestry Council in support of the First Nations Forestry Technician Training Program is well underway. This program assists First Nations students to develop their skills and knowledge of the forest industry with the goal of building capacity for First Nations to be full partners in the sector. At present, staff from local BC Timber Sales offices are mentoring six students across the province and looking forward to providing summer work experience. BCTS is working toward expanding the number of students in the program in future years. 4

8 Percent PROVIDING A CREDIBLE REFERENCE POINT for costs and pricing of timber harvested from public land in B.C. BCTS auction volume as a percent of projected provincial harvest volume 30% 25% 20% 15% 10% 5% 0% 15% % of Harvest Volume Apr 1 - Dec 31, % 21% 13% 12% 23% Targets Actual/Projected Previous Year Q 3 Year The volume of timber advertised by BCTS must be at a level sufficient to support the Market based Pricing system (MPS). By the end of the third quarter, BCTS had advertised 13% of the projected annual provincial harvest volume. This was two percentage points less than target and one point higher than last year s third quarter performance. BCTS is projecting to have advertised 21% of the projected provincial harvest volume by year end. Timber Sales sold, in total, provide sufficient data to support the market pricing system. Percent of BCTS Auctioned Volume Harvested compared to Major Licensees Jan 1, Dec 31, Coast Target Actual Interior For BCTS to ensure it provides credible data to establish market-based stumpage rate it has to develop and auction sufficient timber sales to provide statistically credible data to the Market Pricing System. For the year ended Dec 31, 2012 BCTS has exceeded its targets for both the interior and the coast regions. BCTS auction volume harvested was within 10 percentage points of the Major Licensee harvest volume by species and grade more than 80% of the time. There is no single measure that completely demonstrates our success in providing sufficient data. However, the percent of volume harvested from BCTS auctioned volume as a percentage of the total timber volume harvested from BCTS auctioned volume is within 10 percentage points of the volume harvested by the Major Licensees as a percentage of the total timber volume harvested by the Major Licensees for each major species and grade 80% of the time is a strong indicator of our success in auctioning timber that holistically is representative of the timber species and grades being harvested by the Major Licensees. 5

9 Percent Million cubic meters PROVIDING A RELIABLE SUPPLY OF TIMBER to the market, through open and competitive auctions. Timber Volume Sold Timber Volume Sold (Mm3) Apr 1 - Dec 31, Targets Actual/Projected Previous Year Q 3 Year A key indicator that BCTS is providing a reliable supply of timber to the market is the total timber volume it sells. BCTS sold 6.9 million cubic metres of timber through competitive auctions in the first three quarters. This is 22% less than target and 17% less than the prior year s performance. A higher than expected number of no bid sales is impacting performance. To date 1.4 million cubic metres of timber offered received no bids. This is 26% higher than planned. Some operational issues have also delayed the advertising of a number Timber Sale Licenses. Increasing lumber prices and demand should increase sales in the fourth quarter. BCTS is projecting to be within 2% of its target volume sold by year end. The volume of timber supplied to the market is reliable % of Volume Advertised in Quarter Planned Oct 1 - Dec 31, Target Actual Quarter The percent of timber volume advertised in the quarter planned is another indicator of reliability of supply. This measure is also an indicator of the reliability of BCTS Sales Schedules. In the third quarter, eight of 12 business areas achieved or exceeded the target. Four business areas under achieved the target as a result of delays in development. In total, BCTS advertised 77% of timber volume planned. The delayed volume will be advertised in the fourth quarter. 6

10 Millions Millions MAXIMIZING NET REVENUE FOR THE PROVINCE Gross Revenue $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Gross Revenue April 1- Dec 31, 2012 $178.1 $177.7 $118.7 $117.8 Targets $100.4 $136.6 Actual/Projected Previous Year BCTS gross revenue for the first three quarters was $117.8 million $0.94 million lower than target. Compared to the third quarter of the previous year, gross revenue earned has increased $17.4 million or 17%. Assuming projected timber volume harvested is realised and billed rates remain at their current level BCTS is projecting to substantially achieve its target revenue for the year. Q3 Year Less: Capitalized Expenditures $200 $150 $100 $50 $0 Capitalized Expenditures April 1 - Dec 31, 2012 $159.0 $158.6 $108.8 $108.5 $135.3 $104.9 Targets Actual/Projected Previous Year Capitalized expenditures for the nine months were $3.6 million higher than the previous year and $0.3 million lower than target. BCTS is projecting year end expenditures of $158.6 or 1% under target due to continued cost savings strategies, the impacts of the government hiring restrictions, and lower than expected harvest volumes. Q3 Year 7

11 Millions MAXIMIZING NET REVENUE FOR THE PROVINCE Equals: Net Revenue Net Revenue April 1 - Dec 31, 2012 $35.0 $19.1 $19.1 $9.9 $9.3 Net revenue for the nine months was $0.6M lower than projected and $13.8M higher than last year. BC Timber Sales is expected to achieve its net revenue target of $19.1M by year end. $1.3 ($15.0) Targets Actual/Projected Previous Year ($4.5) Q3 Year Developed Volume Production Timber Volume Developed April 1 - Dec 31, In order to ensure a future reliable supply of timber to the market, maximise future net revenues and meet future demand for timber sales BCTS must ensure sufficient timber is developed each year Actual Projected Target Actual Projected Target To date BCTs has developed 6.8 million cubic metres towards a target of 12.2 million m3 for the year. Internal capacity challenges and supplier shortages are beginning to adversely impact production capability. BCTS is projecting to develop 11.2 million m3 by year-end. The underachievement of 1 million m3 will not be available for auction at the start of fiscal 2013/14. 8

12 APPENDIX 1 - OUTPUTS Key Year to Date Results by Coast and Interior Areas April 1 to Dec 31, 2012 Note 1: The timing variance is the volume of timber advertised but not yet sold at cut off. Target Total Coast Northern Southern Interior Interior Volume Offered (Mm3) Less: No Bid Sales/No Sale (1.1) (1.4) (0.1) (0.9) (0.4) Less: Timing Variance (note 1) (0.7) (0.0) (0.3) (0.4) Plus: YE Timing Variance Volume Sold (Mm3) Volume Harvested (Mm3) Roads (km constructed) Bridges (number installed) Deactivation (km deactivated) Site Prep (Ha) 6,189 5, ,981 Planting (Millions of seedlings planted) Lump Sum Timber Sale Licences Number (TSL) Volume (Mm3) Advertised Less: No Bid/No Sale (26) (0.8) Total Sold Note 1: The timing variance is the volume of timber advertised but not yet sold at cut off. 9

13 APPENDIX 2 - REPORT ON FINANCIAL PERFORMANCE APRIL 1, 2012 DECEMBER 31, / / /13 First quarter Second quarter Third quarter (Millions) (Millions) (Millions) GROSS REVENUE $22.8 $50.3 $44.7 Capitalized Expenses: Cost of Timber Inventory Harvested Administration / Salaries $2.8 $8.6 $8.2 Planning & Sales $2.1 $6.6 $6.4 Access - Amortization $7.8 $7.4 $7.4 Sub-Total Cost of Timber Inventory Harvested ($12.7) ($22.6) ($22.0) Period Costs Silviculture Liability Expense $4.9 $12.6 $9.0 Road & Bridge Maintenance $1.0 $3.0 $2.5 Harvest Conformance $0.0 $0.2 $0.2 Administrative Overhead $6.5 $5.1 $6.5 Land Base Investments / $1.5 Forest For Tomorrow $1.0 $0.5 Land Base Investments / Forest For Tomorrow (Recovered) ($1.0) ($0.7) ($1.6) Sub-Total Period Costs ($12.4) ($20.7) ($18.1) NET REVENUE/(LOSS) ($2.3) $7.0 $4.6 10

14 APPENDIX 2 SELECTED BALANCE SHEET ITEMS April 1, 2012 December 31, / / /13 First quarter Second quarter Third quarter (Millions) (Millions) (Millions) Silviculture Liability $84.4 $85.1 $87.2 Inventory Value of Developed Timber Timber Inventory $124.5 $127.2 $122.8 Opening Balance Timber Developed $7.6 $10.8 $14.9 Timber Available for $132.1 $138.0 $137.7 Sale Cost of Timber Inventory Harvested ($4.9) ($15.2) ($14.5) Timber Inventory Closing Balance $127.2 $122.8 $123.2 Roads Book Value $694.6 $699.2 $707.0 Accumulated Amortization ($433.0) ($440.4) ($447.8) Net Book Value $261.6 $258.8 $259.2 Deactivation Liability $4.2 $4.5 $5.3 Seed Inventory $22.0 $22.1 $22.9 (Unaudited)

15 APPENDIX 3 - Key MPS Variables Distribution Comparisons Interior Table 1: Interior BCTS Representativeness Analysis* - Grades January 1, 2012 to December 31, 2012 Tenure Species Group Grade BCTS Auctions** Major Licences*** Coniferous 1 580, % 4,567, % 2 1,058, % 9,255, % 3 0.0% 0.0% 4 397, % 3,992, % 5 0.0% 0.0% 6 19, % 123, % Dead Potential 2,369, % 11,462, % Live 2,063, % 6,709, % blank 0.0% 0.0% Coniferous Total 6,488, % 36,111, % Deciduous % 15, % 2 10, % 279, % 3 0.0% - 0.0% 4 13, % 320, % 5-0.0% - 0.0% % 7, % Dead Potential 5, % 2, % Live 91, % 39, % blank - 0.0% - 0.0% Deciduous Total 121, % 665, % Interior Total 6,610, % 36,777, % *all logs, species and grades billed to crown land. Excludes special forest products, Christmas trees, waste, reject, private and federal land. Interior grades only. ** BCTS Sec. 20 = file types 'A20', 'A27' and 'B20' - BCTS indicator = 'Y' *** Majors = FL, TFL, TL, FL (sec 47.3) BCTS excluded. Table 2: Interior BCTS Representativeness Analysis* - Species January 1, 2012 to December 31, 2012 SPECIES_GROUP SPECIES BCTS Auctions** Major Licences*** Coniferous Balsam 388, % 2,933, % Cedar 149, % 593, % Cypress % % Fir 319, % 2,166, % Hemlock 136, % 673, % Larch 68, % 343, % Lodge-Pine 4,303, % 20,580, % Spruce 1,093, % 8,727, % White Bark Pine % 6, % White Pine 13, % 48, % Yellow Pine 14, % 38, % Yew 0.0% 0.0% Coniferous Total 6,488, % 36,111, % Deciduous Alder 0.0% (0.2) 0.0% Aspen 96, % 579, % Birch 11, % 7, % Cottonwood 13, % 78, % Maple - 0.0% - 0.0% Deciduous Total 121, % 665, % Interior Total 6,610, % 36,777, % *all logs, species and grades billed to crown land. Excludes special forest products, Christmas trees, waste, reject, private and federal land. Interior grades only. ** BCTS Sec. 20 = file types 'A20', 'A27' and 'B20' - BCTS indicator = 'Y' *** Majors = FL, TFL, TL, FL (sec 47.3) BCTS excluded. 12

16 APPENDIX 3- Key MPS Variables Distribution Comparisons Coast Table 3: Coast BCTS Representativeness Analysis* - Grades January 1, 2012 to December 31, 2012 Tenure SPECIES_GROUP GRADE BCTS Auctions** Major Licences *** Coniferous B % 11, % C 21, % 127, % D 16, % 188, % E % 2, % F 18, % 214, % G % 4, % H 382, % 2,489, % I 197, % 1,293, % J 728, % 4,583, % K 6, % 139, % L 14, % 209, % M 18, % 119, % U 257, % 1,145, % W % 0.0% X 76, % 322, % Y 58, % 236, % Coniferous Total 1,799, % 11,086, % Deciduous W % 45, % Y % % Deciduous Total 7, % 46, % Coast Total 1,806, % 11,133, % *all logs, species and grades billed to crown land. Excludes special forest products, Christmas trees, waste, reject, private and federal land. Coast grades only. ** BCTS Sec. 20 = file types 'A20', 'A27' and 'B20' - BCTS indicator = 'Y' *** Majors = FL, TFL, TL, FL (sec 47.3) BCTS excluded. Table 4: Coast BCTS Representativeness Analysis* - Species January 1, 2012 to December 31, 2012 Tenure SPECIES_GROUP SPECIES BCTS Auctions** Major Licences*** Coniferous Balsam 217, % 1,332, % Cedar 409, % 2,450, % Cypress 64, % 357, % Fir 495, % 2,123, % Hemlock 582, % 4,616, % Lodge-Pine 6, % 5, % Spruce 20, % 193, % White Bark Pine 0.0% % White Pine 1, % 578, % Yellow Pine % % Yew % 0.0% Coniferous Total 1,799, % 11,086, % Deciduous Alder 5, % 37, % Arbutus 0.0% 0.0% Aspen 0.0% 0.0% Birch % % Cottonwood % 6, % Maple 1, % 2, % Deciduous Total 7, % 46, % Coast Total 1,806, % 11,133, % *all logs, species and grades billed to crown land. Excludes special forest products, Christmas trees, waste, reject, private and federal land. Coast grades only. ** BCTS Sec. 20 = file types 'A20', 'A27' and 'B20' - BCTS indicator = 'Y' *** Majors = FL, TFL, TL, FL (sec 47.3) BCTS excluded. 13

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