BC Timber Sales QUARTERLY PERFORMANCE REPORT. For the period April 1st to Sept 30th, 2015 Fiscal 2015/16

Transcription

1 BC Timber Sales QUARTERLY PERFORMANCE REPORT For the period April 1st to Sept 30th, 2015 Fiscal 2015/16

2 Library and Archives Canada Cataloguing in Publication Data BC Timber Sales. Quarter... performance. Quarter 2 (April 1/September 30,2015)- 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 GOAL: Providing Data for the Market Pricing System... 3 Objective 1: Selling the Apportionment... 5 Objective 2: Revenue... 6 Objective 3: Continuous Improvement... 7 Appendix 1 Outputs... 8 Appendix 2 Financial Performance... 9 iii iii

4 INTRODUCTION BC Timber Sales (BCTS) presents its second quarter performance report for 2015/16. Quarterly performance reports are a key part of the BC Timber Sales Performance Management and Accountability Framework. Business Goal BC Timber Sales has one goal and three objectives: Goal: Provide credible representative price and cost benchmark data for the Market Pricing System through auctions of timber harvested from public land in British Columbia. Objectives: 1. Sell the full BC Timber Sales apportionment over the business cycle, consistent with safe practices & sustainable forest management. 2. Generate direct net revenue and indirect revenue for the Province over the business cycle. 3. Continuous Business Improvement Principle 1 - Sustainable Forest Management. Principle 2 - Forest Sector Safety Business Outcomes BC Timber Sales goal, objectives and principles support the outcomes of Economic Prosperity, Sustainable Forest Management and Forest Sector Safety. Economic Prosperity Market priced timber Rural economies, jobs & families Maximum value for asset & net revenue to support government priorities. Continuous improvement & long term success of BCTS. Sustainable Forest Management BCTS is recognized as demonstrating sound forest management. Forest Sector Safety Increased safety awareness & a culture of safety in all its practices & operations. Key Indicators The success of BCTS in achieving its business goal is measured through three key 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 under-achieved its Timber Volume Sold target for the second quarter. However, BCTS is projecting to make up for the slow start and underachievement in the third and fourth quarters. BCTS is ahead of target for production of Developed Volume and Direct Net Revenue and expects to exceed targets for the year. At this time BCTS is projecting to achieve the majority of its Business Plan objectives. Principle 1: Forest Management BCTS 100% certification, remains unchanged from quarter 1. BCTS has begun to implement the updates of its Sustainable Forestry Initiative (SFI) program to meet with the new Forest Management Standard on August 1 st, BCTS continues its work from quarter 1, review and updating the Canadian Standards Act (CSA Z809) and the FSC Canada Standards. Principle 2: Safety BCTS has successfully completed an external certification audit and is SAFE Company certified through In addition BCTS has completed a Management Review and a review of all reported incidents for the last three years. The information gathered through the audit and reviews will be used to guide the continual improvement of the BCTS Safety Program. BCTS continues to 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. 2 2

6 GOAL: PROVIDING CREDIBLE DATA FOR MPS BCTS auction volume as a percent of projected provincial harvest Percent 25% 20% 15% 10% 5% 0% % of Projected Harvest Volume 22.9% 22.7% 22.1% 10% 9% Targets Actual/ Projected 8.5% Previous Year Q2 Year The volume of timber auctioned by BCTS must be at a level sufficient to support the Market based Pricing System. In the second quarter BCTS had advertised 9% of the projected annual provincial harvest volume. Due to operational issues, performance is 10% less than target and 6% more than last year s second quarter performance. BCTS is projecting make up for the slow start and auction 22.7% of the projected provincial harvest volume by year end. BCTS auction volume as a percent of projected provincial harvest volume Coast and Interior Percent 30% 25% 20% 15% 10% 5% Percent of Projected Harvest 24% 19% 9% 6% Q2 Year In the second quarter BCTS only advertised 6% of the projected annual harvest volume on the Coast and 9% in the Interior. The slow start on the Coast and Interior was due to various operational issues and higher no bid sales. BCTS is working to address the operational issues and is projecting to auction 19% in the Coast and 24% in the Interior by year end. 0% Coast Interior 4 3 3

7 GOAL: PROVIDING CREDIBLE DATA FOR MPS The percent of BCTS timber volume sold is within 5% of the percent of harvest volume by major licensees for each major species and grade 80% of the time 95% Percent of BCTS Auctioned Volume Harvested compared to Major Licensees Oct 1, Sept 30, % BCTS must develop and auction a representative volume of timber sales to provide statistically credible data to the Market Pricing System. This data is used to establish market-based stumpage rates. Percent 90% 85% 80% 75% 70% 86% 80% 80% Coast Interior Target Actual For the year ending Sept 30th, 2015, the BCTS auction volume harvested was within 5 percentage points of the Major Licensee harvest volume by species and grade more than 80% of the time. This indicates good representation of harvest volume by BCTS. For BCTS to ensure it provides credible data to establish market-based stumpage rate it also has to ensure its data is complete, accurate, and reliable. BCTS is implementing a Data Quality Management System to ensure that its data is complete, accurate, and reliable. The quality management system will be applied to all data supporting MPS, and Financial and Performance reporting. 4

8 OBJECTIVE 1: SELLING THE APPORTIONMENT Timber Volume Sold Millions m Targets Volume Sold (Mm3) Apr 1 - Sept 30, Actual/ Projected Previous Year Q2 year Timber volume sold is a key measure that BCTS is selling its apportionment over the business cycle. By the end of the second quarter BCTS had sold 24% less timber than its target and 8% less than the prior year. Operational issues continued to delay the sale of a number licences which have been rescheduled to the 3 nd and 4 rd quarters. BCTS is projecting catch up and achieve its volume sold target by year end. BCTS is planning to sell 94.4% of the rationalized annual apportionment of 12.8Mm3. Develop sufficient timber to maximise timber volume offered and sold Millions m Timber Volume Developed (ADV) Apr. 1 - Sept 30, Target Actual Q2 Year BCTS develops timber for future auctions in order to have sufficient inventory to achieve its targets. During the first two quarters BCTS developed 2.9Mm3 of timber, exceeding the target by 16%. This early over achievement was primarily due to efforts to advance production in two interior business areas. Overall, BCTS is projecting to substantially achieve its production target by the end of the fiscal year. The volume of timber supplied to the market is reliable Percent 140% 120% 100% 80% 60% 40% 20% 0% % of Volume Advertised in Planned Quarter June 1, 2015 to Sept 30, % 125% 110% Target-Min Q2 Target - Max Timber volume advertised in the quarter planned is an indicator of the reliability of timber supply and the reliability of BCTS Sales Schedules. In the second quarter, only 2 of 12 business areas achieved their planned sales volumes. 6 business area under achieved their target, due to operational issues and 4 over achieved their targets, due to advertising more to make up for quarter 1 short fall. BCTS advertised 125% of timber volume however plans to be on track 3 rd or 4 th quarter. 5

9 OBJECTIVE 2: REVENUE Millions $300 $250 $200 $150 $100 $50 $0 $124.2 $248.4 Gross Revenue Apr 1 - Sept 30, 2015 $129.6 $276.9 $110.2 $253.8 Targets Actual/Projected Previous Year Q2 Year Gross Revenue BCTS over-achieved its gross revenue target in the first six months due to higher than expected prices and harvest volumes. Gross revenue was 4% over target and an 18% increase over the prior year. BCTS is projecting to continue to realise higher volumes and prices and to exceed its target Less: Capitalized Expenditures $200 $150 Capitalized Expenditures Apr 1 - Sept 30, 2015 $164.6 $170.7 $162.2 Capitalized expenditure for the six months was $3.7 million more than the previous year but $6.9 million less than the target. Millions $100 $50 $- $82.3 $75.4 $71.7 Targets Actual/Projected Previous Year Q2 Year BCTS is projecting to over achieve year end expenditures, due to staffing and operational delays. Equals: Net Revenue Millions $120 $100 $80 $60 $40 $41.9 $83.8 Net Revenue April 1 - Sept 30, 2015 $54.2 $106.2 $38.5 $93.8 Q2 Year Due to the increased revenues BCTS net revenue for six months was $12.3M more than the target and $15.7M more than last year. BCTS is projecting to exceed its net revenue target by 27% by year end. $20 $- Targets Actual/Projected Previous Year 6 6

10 OBJECTIVE 3: CONTINUOUS IMPROVEMENT To effectively realize its vision, achieve its mission and goal, deliver superior performance, and make a distinct and lasting impact, BC Timber Sales needs to be continuously improving. Only those with Excellent Processes and Excellent People will truly excel. To achieve this continuous improvement BC Timber Sales and its people are committed to continuously learn, innovate, and lead through change in the pursuit of excellence. BCTS has embraced Lean as the next step in continuous improvement. Pursue Effective Relationships In the second quarter, BCTS developed and endorsed a Business Relationships Strategy in support of a vision of effective business relationships. The goal of the strategy is to ensure our business relationships: 1. Support BCTS ability to fulfill its role, including supporting the MPS, selling its full allowable annual cut over the business cycle and generating direct and indirect revenue; 2. Strengthen the role of BCTS within the forest sector and rural economies; and 3. Provide BCTS with the continuity of social licence to deliver superior and enduring performance. Bill 25 - Forests, Lands and Natural Resource Operations Statues Amendment Act was brought into force through Order-In-Council on July 28th. This legislation supports effective relationships and provides BCTS with more effective tools to pursue business to business agreements such as timber rights disposition agreements, and business service agreements. BCTS Business Areas hired eight students for a 4-month term during the summer of 2015, through a joint program with the Ministry s First Nations Relations Branch and other government agencies to support the BC First Nations Forestry Council First Nations Forestry Training Program. These students, who were mentored through their time in school and at work, obtained valuable forestry field experience. This is in keeping with the program s goal of building capacity for First Nations in the forest sector, and filling a need for qualified people for years to come. Plans for the program for 2015/16 are underway. Pursue excellence in people BCTS engaged in outreach with colleges and universities to promote the new Forestry Technologist Entry Level Program (FTELP). The goal is to begin recruitment into the program in January 2016 with a first cohort starting with BCTS is the spring. The BCTS People Practices Working Group summarized and reviewed the people focussed activities undertaken by BCTS since the 2013 Wok Environment Survey. This summary was shared across the organization. BCTS leadership team reviewed the 2014/2015 people focussed actions, and formulated the people priorities for the organization for the 2015/2016 year. Pursue excellence in operations, practices and processes Lean is a business improvement philosophy that focuses on fostering and enabling a continual improvement culture by encouraging efficiency through the elimination of unnecessary rules, processes and non-essential steps. BCTS completed one improvement workshop in Q2 as part of the Northern Lean portfolio of projects. The Northern Lean Silviculture Project reviewed the silviculture survey process and identified opportunities to standardize the process between BCTS Timber Sales Offices. The improvements will improve the consistency of BCTS reporting and improve the consistency and quality of the contract documents. 7

11 APPENDIX 1 - OUTPUTS Key Year to Date Results by Coast and Interior Areas April 1 st to Sept 30th, 2015 Note 1: The timing variance is the volume of timber advertised but not yet sold at cut off. Target Total Coast Northern Interior Southern Interior Volume Offered (Mm3) Less: No Bid Sales/No Sale (0.4) (0.7) (0.0) (0.4) (0.3) Less: Timing Variance (note 1) (0.3) (0.0) (0.1) (0.2) Plus: YE Timing Variance Volume Sold (Mm3) Volume Harvested (Mm3) DELIVERABLES Roads (km constructed) Bridges (number installed) Deactivation (km deactivated) Site Prep (Ha) 2,169 2, ,372 Planting (Millions of seedlings planted) Lump Sum Timber Sale Licences Number (TSL) Volume (Mm3) Advertised Less: No Bid/No Sale (11) (0.26) Total Sold Note 1: The timing variance is the volume of timber advertised but not yet sold at cut off. 8

12 APPENDIX 2 - REPORT ON FINANCIAL PERFORMANCE April 1, 2015 Sept 30, /16 First quarter (Millions) 2015/16 Second quarter (Millions) Revenue from External Sources $45.8 $83.8 GROSS REVENUE $45.8 $83.8 Capitalized Expenses: Cost of Timber Inventory Harvested Administration / Salaries $3.5 $6.9 Planning & Sales $4.1 $9.8 Access - Amortization $7.0 $6.7 Sub-Total Cost of Timber Inventory Harvested ($14.6) ($23.4) Other Costs Silviculture Liability Expense $10.0 $10.0 Road & Bridge Maintenance Road Deactivation $1.4 $0.0 $4.1 $0.1 Harvest Conformance $0.1 $0.1 Operational & Administrative Overhead $5.7 $6.4 Land Base Investment/ Forest For Tomorrow (FFT) Land Base Investment/ FFT Recoveries $1.0 ($1.1) $2.4 ($2.7) Sub-Total Other Costs ($17.1) ($20.3) NET REVENUE/(LOSS) $ 14.1 $

13 Selected Balance Sheet Items 2015/16 First Quarter (Millions) 2015/16 Second Quarter (Millions) Silviculture Liability $ $104.6 Inventory Value of Developed Timber Timber Inventory Opening Balance $131.2 $133.0 Timber Developed $ 9.4 $ 18.4 Timber Available for Sale $140.6 $151.4 Cost of Timber Inventory Harvested ($ 7.6) ($ 16.7) Timber Inventory Closing Balance $133.0 $134.7 Roads Book Value $739.2 $749.0 Accumulated Amortization ($493.7) ($500.4) Net Book Value $245.5 $248.6 Deactivation Liability $ 7.8 $ 7.4 Seed Inventory $ 21.8 $ 21.8 (Unaudited) 10

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