LamLum : a tool for evaluating the financial feasibility of laminated lumber plants

Abstract

A spreadsheet-based computer program called LamLum was created to analyze the economics of value- added laminated lumber manufacturing facilities. Such facilities manufacture laminations, typically from lower grades of structural lumber, then glue these laminations together to make various types of higher value laminated lumber products. This report provides the documentation for LamLum. LamLum may be downloaded from the USDA Forest Service, Forest Products Laboratory, website (www.fpl.fs.fed.us/documnts/fplgtr/fpl_gtr165/fpl_gtr165.html). Extensive screenshots from the program are presented in this documentation. LamLum incorporates discounted cash flow analysis to determine under what conditions a laminated lumber plant might be profitable. LamLum can also be used to aid in payroll and employment planning. Break-even analysis is incorporated to calculate the maximum amount that may be paid for laminations while still returning the required rate of return on invested capital to owners. Plant and equipment, raw materials, wages, administration costs, and working capital are linked to provide cash flow tables and summary financial measures for profitability analysis. A summary cash flow chart and a pie chart showing key cost categories simplify analysis. In addition to cash flows and basic financial measures, LamLum provides physical product flows with respect to both wood inputs and wood product outputs. LamLum is structured so that users may easily perform a sensitivity analysis on revenues and key costs without going into the detailed assumptions. Cost contingency factors allow major cost categories to be changed independently of the sensitivity analysis. Products, species and grades, and lamination costs may be changed over time to allow for changing resource requirements or availability and thereby provide flexibility in planning. Extensive built-in annotation in the spreadsheet provides guidance and help. Built-in warnings and error messages help reduce input errors and inform users when and why their results might not be believable.

Citation

Bilek, E.M. (Ted); Hunt, John F. 2006. LamLum : a tool for evaluating the financial feasibility of laminated lumber plants. Gen. Tech. Rep. FPL-GTR-165. Madison, WI: U.S. Department of Agriculture, Forest Service, Forest Products Laboratory. 33 pages