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Highlights:
Viability of an investment project for wood processing was evaluated.
Sourcing, processing and management costs defined the price of sawn timber.
Feasibility was evaluated based on the estimated income tax.
Financial and economic indicators were positive, making the project viable.
The creation of a sawmill in the Basihuare ejido is a feasible way to strengthen the ejido's economy.
Introduction
In Mexico, the Agrarian Law regulates human activity and its natural environment, as well as land tenure relations, production, exploitation, marketing and industrialization processes in the agricultural, livestock and forestry sectors (Congreso de la Unión, 2018; Reyes Monsiváis, Herrera Izaguirre, Cruz Rodríguez, & Ramírez Erazo, 2017). Social land ownership represents 52 % of the surface area (Centro de Estudios para el Desarrollo Rural Sustentable y la Soberanía Alimentaria, 2015) at the national level. Morett-Sánchez and Cosío-Ruiz (2017) mention that, of the 2 207 ejidos and communities with forestry activities, around 300 have sawmills. The community forest industry is mainly distributed in the states of Durango and Chihuahua (Bray & Merino-Pérez, 2004). In Chihuahua, the cover taken by cold temperate forests is 7.2 million ha (Vargas-Sánchez et al., 2018), which concentrated 24.4 % of the national timber reserve for 2017 (SEMARNAT, 2020).
The promotion of the forest industry plays a vital role in socioeconomic development, especially for forest-dependent communities (Guettabi, 2015; Lupo, 2017; Merino-Pérez, 2018). Within the agrarian nuclei, the forest industry helps to generate jobs, diversify production and gives added value to the products to ensure the long-term success of enterprises (Makkonen & Sundqvist-Andberg, 2017); besides, several families receive a salary and additional benefits such as social security, major medical insurance, and retirement (Eke, Gretzinger, Camacho, Sabogal, & Arce, 2016; Sánchez-Vidaña, Valtierra-Pacheco, González-Guillén, & León-Merino, 2018).
Brege, Nord, Sjöström, and Stehn (2010) indicate that value-added strategies in sawmills have positive effects on profitability in terms of unit revenues and feasibility measured as return on investment. Han and Hansen (2017) mention that a better understanding of market demands can potentially benefit companies involved in the forest products industry, while Zavala Zavala and Hernández Cortés (2000) say that, to keep the sawmill competitive, it is necessary to analyze the production processes on an ongoing basis.
In terms of history, the state of Chihuahua has had better prospects in the sector, due to timber stocks, geographic location and productive capacities (Ruelas-Monjardín & Dávalos-Sotelo, 1999). Rascón-Solano, Kiessling-Davison, Villarreal-Ramírez, Macias-Lopez, and Hermosillo-Nieto (2019a) indicate the relevance of establishing sawmilling centers in communities and ejidos by creating investment projects.
Prior to the analysis of the financial indicators of an investment project, it is necessary to estimate the possibility of processing, therefore, understanding the sawmill yield is important for sawmills (Valério, Watzlawick, Balbinot, Wincker Caldeira, & Filho, 2009), because this indicator gives the option of identifying losses in timber processing (Zavala & Hernández, 2000). After estimating the timber processing capacity of the industry, it is possible to determine the economic investments involved in the process. Hernández-Díaz, Pérez-Verdín, Corral-Rivas, and Pinedo-Álvarez (2011) and Rascón-Solano, Olivas-García, Kiessling-Davison, Hernández-Salas, and López-Daumas (2020) suggest the need to analyze and evaluate the costs of timber forest production, so it is necessary to determine the means and amounts of product marketing. The first means used is the sale of Mill Run wood (mixed grades) (Nájera et al., 2011b), which in the state of Chihuahua reached a price of 6.68 MXN per board foot (BF) (Vázquez-Álvarez, Luján-Álvarez, Olivas-García, González-Hernández, & Luján-Álvarez, 2017) and in the region of Guachochi ranged between 9.20 MXN∙bf-1 (Vargas-Sánchez et al., 2018) and 7.50 MXN∙bf-1 (Rascón-Solano et al., 2020). The second means is the timber grading, supplying in this zone grade 2 and better, grade 3, grade 4 and grade 5 with a price of 15.00, 12.50, 10.00 and 7.00 MXN∙bf-1, respectively (Rascón-Solano, Kiessling-Davison, Villarreal-Ramírez, Uranga-Valencia, & Palacios-Monarrez, 2019b).
Based on the above, it is possible to evaluate the profitability of the investment project (Rebollar-Rebollar, Posadas-Domínguez, Rebollar-Rebollar, Hernández-Martínez, & González-Razo, 2020). Hernández-Díaz et al. (2011) and Calero-Guevara, Leonor-Toala, and Cevallos-Enríquez (2016) report that the financial indicators used in the forestry sector are the net present value (NPV), the internal rate of return (IRR), and the benefit-cost (B/C) relationship. As for economic indicators, Rascón-Solano et al. (2019a). As for economic indicators, Rascón-Solano et al. (2019a) use the calculation of the break-even point (BEP) and the payback period (PBP). Furthermore, Rascón-Solano et al. (2020) propose the evaluation of sawmills by calculating the economic profitability (EP)
The objective of this study was to formulate an investment project for sawmills for the Basihuare ejido and to evaluate the feasibility of buying machinery and equipment by estimating financial and economic indicators.
Materials and Methods
The study was carried out in the Basihuare ejido located in the west-central region of Chihuahua, north of the municipality of Guachochi. The Forest Management Program indicates that the ejido has an area of 35 491.04 ha distributed among 212 ejidatarios. About 14 200 ha have commercial production potential of Pinus with a total potential of 174 546.52 m3 total stem volume (tsv) distributed over a cutting cycle of 15 years; however, the ejido lacks the necessary equipment for the processing of timber products.
The Basihuare ejido has records of roundwood inputs from 2015 to 2019, as a result of pine timber harvesting. These data show the supply flows to private sawmilling yards and sawmills, where raw materials are marketed during the aforementioned period. This information is used to make supply projections from 2020 to 2024 based on labor and weather conditions. Sawn timber production was estimated with information on authorized volumes of Pinus from 2020 to 2024. The sawmilling coefficients, distribution of sawn timber grades and their market price were determined with historical information generated by a private sawmill in the municipality of Guachochi, taking into account the processing activity between the years 2014 to 2018.
The feasibility of this proposal was evaluated with the investment project formulation and evaluation methodology proposed by Baca-Urbina (2013), through the estimation of the income tax (ISR) established based on the income acquired. This method indicates the need to estimate the NPV, IRR and B/C ratio of the project. By calculating the NPV it is possible to consider the cash flow over time (Arreguín-Sámano, González-Ellas, Delgado-Henández, & Carrillo-Espinosa, 2014). This indicator is estimated with the following equation:
where,
I 0 = initial investment
F = cash flow per period
(1 + k) = cash flow discount factor
n = project horizon (five years).
The IRR is the interest rate or return offered by an investment. Hernández-Díaz et al. (2011) and Rascón-Solano et al. (2019b) propose the evaluation of this indicator taking into account an annual average rate of return (AARR) of 10 %.
Where:
Fn = cash flow in period n
n = project horizon
i = discount rate.
Zamudio-Sánchez, Romo-Lozano, and Cervantes-Carrillo (2010) report that the B/C relationship is the calculation that makes it possible to analyze the effect that the updated revenues of the activity have on the updated expenditures.
Where:
B j = positive net cash flow for period j
C j = negative net cash flow for period j
i = investment discount rate
n = project horizon.
Rascón-Solano et al. (2019a) indicate that the BEP determines the amount of board feet marketed for the costs invested in carrying out the activity.
Where:
CF = fixed costs
P = unit price
CV = unit variable costs.
Rascón-Solano et al. (2019b) report that the PR estimates the time it will take for the initial investment to be solved by the profits from the marketed sawn timber.
Where:
Tp = time of payment
F j = net cash flow for period j
i = discount rate
n = project horizon.
The RE formula includes earnings before interest and taxes (gross profit) as a concept of result and total assets in average condition (annual gross profit plus the initial value of fixed assets) as a concept of investment (Rascón-Solano et al., 2020):
Results
Flows and raw material costs
With the knowledge of historical flows, it was possible to estimate the extraction and supply activities that may occur between 2020 and 2024, based on the volumes programmed for each year. Figure 1a shows extraction and supply patterns of raw materials used by the ejido. Figure 1b shows that during the months of January and December, the volumes delivered to consumers were less than 400 m3 of logs; the low supply volume in this period is attributed to the beginning and end of the harvesting year, respectively. The summer rainy season (July, August and September) also reduced the volume of supply, as environmental conditions impacted the working days of raw material extraction activities in the cutting areas.
Figure 1 Extraction and supply flows of Pinus genus raw material in the Basihuare ejido, Guachochi, Chihuahua: a) historical and predicted annual flows, b) monthly flows. Source: Compiled by the authors with data from the ejido.
The ejido manages its extraction and supply activities by regulations established by the ejidal assembly, which grant exclusive labor rights to its members. There are an estimated 220 working days in extraction and supply activities, because summer weather conditions and regional traditions (cultural and agricultural) affect the continuity of forestry activities. The processing of raw materials is affected mainly by the flow of supplies and cultural and agricultural activities in the region; 280 working days were estimated for sawmills in the municipality.
The ejido administration in turn sets the production cost for the activity to be carried out and makes the supply payments based on productivity in thousand board feet (tbf), equivalent to approximately 4.72 m3. It is important to mention that this volume is inaccurate and should only be used as a method to estimate sawn timber production; therefore, its use is not recommended for timber activities in the country. Calculations were made using the volume used by the ejido that officially recognized (m3). This information is shown in Table 1.
The value of standing raw material was estimated at 180.08 MXN∙m-3 total stem volume (tsv), where logging of pine trees costs 84.74 MXN∙m-3 tsv. Dragging and loading raw material is carried out with the use of equines with draft implements, paying 127.12 MXN∙m-3 tsv. On the other hand, road planning comprises two activities: the development of extraction roads and the rehabilitation of existing roads; 42.37 MXN∙m-3 tsv are assigned for this activity. Together, the amounts granted by the ejidal assembly, concerning extraction and supply work need an investment of 995.75 MXN∙m-3 tsv of timber. For 2020, an investment of 495 813.74 MXN was contemplated, destined for the rental of heavy machinery and distribution of temporary salaries.
Table 1 Raw material costs in the Basihuare ejido, Guachochi, Chihuahua.
| Concept | Cost per thousand board foot (MXN) | Cost (MXN∙m-3 tsv) |
|---|---|---|
| Standing timber | 850 | 180.08 |
| Logging, skidding and loading | 1 000.00 | 211.86 |
| Documenter and logger | 150 | 31.78 |
| Road planning, construction and rehabilitation | 200 | 42.37 |
| Logging trunk | 2 500.00 | 529.66 |
| Total cost | 4 700.00 | 995.75 |
Source: Compiled by the authors with data from the ejido.
It is estimated that the Basihuare ejido will have to invest around 11 652 415 MXN for extraction and supply of raw materials in 2020. During the period of 2020-2024, it is estimated that the ejido will have invested approximately 56 418 440 MXN under the same labor concept.
By 2020, the ejido has 93 temporary jobs, necessary to carry out logging and extraction of raw materials, with an average payment of 30 234 MXN per day laborer. As for the supply work, there are 17 drivers who will get 364 593 MXN for transporting 688 m3 of pine logs each, which is the highest salary that the ejido company pays for the jobs.
Administration and service costs
The ejido administration is made up of a president, secretary, treasurer of the commissariat, supervisory board and alternates. Accounting for the number of positions involved and the unit salaries, the ejido would be using 1 653 735 MXN for administrative salaries in 2020.
The services required by the ejido are forestry technical services for professional advice on harvesting and processing, security guard for the industrial plant and basic services. It is estimated that the above-mentioned factors would add up to 8 914 335 invested. In addition, it is planned to include the payment of medical services for the ejidatarios and industrial insurance. The total administrative costs are covered by an investment of 0.89 MXN per sawed board foot (Table 2).
Table 2 Administrative and projected services costs for a sawmill of the ejido company in Basihuare, Guachochi, Chihuahua.
| Concept | Cost (MXN∙bf-1) | Cost per thousand board foot (MXN) |
|---|---|---|
| Forestry technical services | 0.2 | 200 |
| President of the Ejido commissariat | 0.06 | 60 |
| Alternate president | 0.03 | 25 |
| Secretary of the Ejido commissariat | 0.03 | 30 |
| Alternate for the secretary | 0.02 | 20 |
| Treasurer of the Ejido commissariat | 0.03 | 30 |
| Alternate for the treasurer | 0.02 | 20 |
| Security guard board | 0.03 | 30 |
| Alternate for the council | 0.02 | 20 |
| Industry security guard | 0.03 | 30 |
| Ejidatarios insurance | 0.03 | 30 |
| Industrial insurance | 0.21 | 210 |
| Electric service | 0.15 | 150 |
| Water service | 0.03 | 30 |
| Total cost | 0.89 | 885 |
Source: Compiled by the authors with data provided by the Basihuare ejido.
Value of equipment and infrastructure
Due to the previous knowledge of this type of machinery and the validity of its implementation, the incorporation of traditional sawmill equipment was contemplated to facilitate the processing; these components are listed in Table 3. The sawmill equipment consists of a Mexican-made NEKS main tower with flywheels for a 6-inch (15.24 cm) wide, 17-gauge band, 3.81 cm tooth pitch, 1.58 cm throat depth, 30° tooth angle, 45° angle of attack and 27° angle of incidence.
The processing platform consists of a 16-foot (4.87 m) long square carriage with two squares, driven by a forward and reverse motor called “friction” in the region; like the main saw, this equipment is manufactured in Mexico by NEKS. In addition, a three-head resaw with 15 hp (11.18 kW) motors is also manufactured by NEKS; the band saws used in this equipment are 1.27 mm thick, 38 mm wide, with a 22.23 mm tooth pitch and a 13° angle of attack. This machinery allows multiple cuts to be made and speeds up production processes.
The infrastructure consists of a 10 m wide by 30 m long warehouse, built with a 20 x 20 cm IPR metal beam insulated with industrial paint, 5 x 5 cm PTR metal beam rafters and GR100 industrial galvanized sheet metal. The base of the infrastructure has insulated footings of 80 x 80 x 80 cm, a concrete floor with a load capacity of 200 kg∙cm-2 and thickness of 12.5 cm. The amount of infrastructure (Table 3) includes electrical installation, which includes a Voltran three-phase transformer of 300 kW, 23 000 V and optional inputs for 220 and 440 V currents with a value of 152 186 MXN. The total cost of the sawmill infrastructure and equipment is estimated at 5 171 204 MXN with an average annual depreciation of 10 %, giving a value of 2 585 602 MXN at the end of the project horizon (five years).
Table 3 Value of sawmill equipment and infrastructure costs of a sawmill of the ejido company in Basihuare, Guachochi, Chihuahua.
| Concept | Number | Net price (MXN) |
|---|---|---|
| Structure and office equipment | 1 | 180 395.53 |
| Safety equipment | 10 | 25 397.00 |
| Firefighting equipment | 5 | 9 625.00 |
| 12-foot feeder | 1 | 185 000.00 |
| 6-inch tower | 1 | 165 000.00 |
| Friction equipment | 1 | 39 000.00 |
| 16-foot square car | 1 | 109 000.00 |
| 6-foot feeder | 1 | 170 000.00 |
| Log table | 22 | 83 600.00 |
| Wood-mizer | 1 | 56 000.00 |
| Horizontal pendulum | 1 | 29 000.00 |
| Triple head resaw | 1 | 257 000.00 |
| Chemical tank | 1 | 120 000.00 |
| 24-foot transfer table | 1 | 58 000.00 |
| Infrastructure and electrical installation | 1 | 3 684 186.20 |
| Total cost | 5 171 203.73 |
Source: Compiled by the authors with quotation data.
Salaries and costs of the sawmill industry
A proposal to the ejidal assembly assigned the positions corresponding to sawmill work and proposed the wages of the ejidatarios integrated into the sawmill, with a production cost of 0.51 MXN∙bf-1. Table 4 specifies the wages planned for hiring at least 10-day laborers.
Table 4 Labor positions and amounts assigned by timber production in the sawmill industry in the Basihuare ejido, Guachochi, Chihuahua.
| Concept | Cost (MXN∙bf-1) | Cost per thousand bf (MXN) |
|---|---|---|
| Log Roller machine | 0.02 | 20 |
| Sawyer and sharpener | 0.07 | 70 |
| Assisstant 1 | 0.02 | 30 |
| Assistant 2 | 0.02 | 20 |
| Wood-mizer | 0.04 | 40 |
| Assistant 3 | 0.02 | 20 |
| Pendulum saw | 0.04 | 40 |
| Timber grading | 0.07 | 70 |
| Wood stacker 1 | 0.02 | 20 |
| Wood stacker 2 | 0.02 | 20 |
| Industrial technical assistance | 0.03 | 30 |
| Labor training | 0.03 | 30 |
| Equipment maintenance | 0.03 | 30 |
| Spare parts for equipment | 0.03 | 30 |
| Contingencies | 0.04 | 40 |
| Total cost | 0.51 | 510 |
Source: Compiled by the authors with data from the Basihuare ejido.
The log bandsaw operator will fulfill two functions within the industry: the sharpening of the bands used in the main cutting equipment and its operation. This improves the sawing process, reducing the defects derived from cutting and, in turn, reduces the company's expenses. Due to the importance of the position, the main saw operator and the sorter obtain the highest salaries, 560.00 MXN per day, regarding an average production of 8 000 bf.
The concept of "contingencies" is intended to cover unofficial expenses, such as the need to intermittently purchase administrative, accounting and legal advice. Most community sawmill industries in the state of Chihuahua and, probably, in the rest of the country, do not take this concept into account, which causes economic imbalances for the ejido enterprise.
The processing of raw materials represents an investment of 5 137 074 MXN over a period of five years, starting in 2020 and ending in 2024, time during which the financing payment of the acquired industry will be made.
Estimation of production and value of sawn products.
To estimate a possible production flow of processed roundwood, the historical calculations of sawmilling coefficient (2014 to 2018) of a private sawmill located in Guachochi, Chihuahua were used as a reference (Figure 2). The sawmilling equipment used in this company is NEKS, with the same characteristics as the machinery used in the Basihuare ejido.
Figure 2 Historic yields at the private sawmill located in Guachochi, Chihuahua. Source: Compiled by the authors with data from the private sawmill center.
Estimates indicate that, during the first year, sawmill yields ranged 12.73 % between the first month of activity (lower yield) and the eleventh month (higher yield). In contrast, from 2015 to 2018, the largest variation in the sawing coefficient was 4.95 %. This information allows us to obtain an approximation of how the sawmilling processes and yields would result in the Basihuare ejido. The calculations to determine the economic yields of the company based on the sawing coefficient were made with respect to this historical data.
Furthermore, in the private company, the distribution of pine timber grading was estimated according to the NMX-C-224-ONNCCE-2001 recommended by Orozco-Contreras et al. (2016). Ratios of 3.80, 14.60, 23.60, 23.60, 28.00 and 30.00 % were obtained for timber 2 and better, grade 3, grade 4, grade 5 and wooden pole, respectively. The prices established during 2019 were provided for the various products marketed according to the timber grading. Based on the projection made in the private industry, taken as a reference for this process, an increase of two percentage points was proposed for the price of the products starting in 2023, as shown in Table 5. Production costs have not increased because they are established by the current administration and approved by the ejidal assembly (it is not known if salaries will increase or remain the same in future administrations).
Table 5 Prices established for sawn pine products in the Basihuare ejido.
| Sawn timber price (MXN∙bf-1) | ||||||
|---|---|---|---|---|---|---|
| Type | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| 2 and better | 18.68 | 18.68 | 18.68 | 18.68 | 19.05 | 19.05 |
| Number 3 | 14.02 | 14.02 | 14.02 | 14.02 | 14.30 | 14.30 |
| Number 4 | 11.48 | 11.48 | 11.48 | 11.48 | 11.71 | 11.71 |
| Number 5 | 8.09 | 8.09 | 8.09 | 8.09 | 8.25 | 8.25 |
| Wooden pole | 9.05 | 9.05 | 9.05 | 9.05 | 9.23 | 9.23 |
Source: Compiled by the authors with data from the private sawmill center.
Estimated cash flows
Established expenditures for payroll and infrastructure and equipment costs were determined, and income from the sale of sawn products was estimated. Table 6 shows the projected cash flows for the industrial forestry investment in the Basihuare ejido.
To buy the equipment, the ejido needs to make an initial investment of 1 551 361 MXN, which can be partially covered by 2019 profits. Moreover, it is necessary to borrow 3 619 842.61 MXN at a discount rate of 12 % over a five-year horizon.
Based on an estimated inflation rate of five percentage points and the volume extracted for the first year of activity (year zero), total production costs are 18 795 723 MXN. In terms of income, it was estimated that the company would not generate profits from product processing, because this is the period when the project is being planned; however, income from roundwood sales is 14 457 450 MXN. The first year of processing activities will result in a profit of 19 483 571 MXN, with a cash flow of 3 879 909 MXN and a net profit of 2 649 002 MXN after the payment of income tax calculated at a rate of 35 %. During 2024, the ejido will obtain a net profit of 4 123 637 MXN, due to an estimated growth rate of two percentage points in the price of sawn timber and the variability of extraction volumes.
Table 6 Projected income, expenses, cash flows and taxes in the sawmill industry in the Basihuare ejido, Guachochi, Chihuahua.
| Annuity | Year | Income (MXN) | Expenses (MXN) | Cash flow (MXN) | Income tax (ISR, MXN) | Profit after payment of ISR (MXN) |
|---|---|---|---|---|---|---|
| 2019 | 0 | 14 457 450.00 | 18 795 722.82 | -4 338 272.82 | - | -4 338 272.82 |
| 2020 | 1 | 19 483 571.72 | 15 603 662.52 | 3 879 909.20 | 1 230 907.21 | 2 649 001.99 |
| 2021 | 2 | 25 757 619.77 | 18 146 810.74 | 7 610 809.03 | 2 538 960.69 | 5 071 848.34 |
| 2022 | 3 | 20 968 365.44 | 15 018 437.68 | 5 949 927.76 | 1 956 655.72 | 3 993 272.04 |
| 2023 | 4 | 18 574 534.39 | 13 419 237.71 | 5 155 296.68 | 1 678 058.06 | 3 477 238.62 |
| 2024 | 5 | 21 154 939.67 | 15 004 265.80 | 6 150 673.88 | 2 027 037.31 | 4 123 636.57 |
| Total flow | 120 396 480.99 | 95 988 137.27 | 24 408 343.72 | 9 431 618.99 | 14 976 724.73 | |
Source: Compiled by the authors with data generated for the Basihuare ejido.
Evaluation of financial and economic indicators
The feasibility of the industrial investment project for the Basihuare ejido was evaluated by estimating financial and economic indicators. According to the NPV equation, a value of 16 194 605 MXN was obtained at a discount rate of 12 %; being positive, this indicator is considered acceptable for the company's stability. The IRR reaches 78.69 %, which is higher than the minimum IRR of 10 %. Therefore, the project is considered profitable and financially stable. Figure 3 shows that the estimates can be considered accurate, since NPV and IRR are intercepted by the linear trend of the curve corresponding to the values calculated at various rates of return.
Figure 3 Graphical representation of the net present value (NPV) and internal rate of return (IRR) of the industrial investment project in the Basihuare ejido, Guachochi, Chihuahua. Source: Compiled by the authors with data calculated for the Basihuare ejido.
As for the B/C relationship, the project evaluation yields a value of 1.25, indicating that for each unit invested in the project, a profit of 0.25 MXN will be obtained; since this indicator is positive, the investment is considered viable.
According to the break-even point calculation, the total production of the products manufactured at the sawmill is 1 520 255 bf. Figure 4 shows the behavior of fixed, variable and total costs and gross profit versus expected profit.
The PBP was calculated with the cash flows in the established horizon, using the consecutive discounting of profits for each year, concluding the estimation with a cash residual. It was found that the time to recover the investment is 2.07 years, equivalent to two years and 26 working days, taking into account 280 working days per year in the sawmill. Furthermore, it is necessary to generate 3 million bf to recover the investment in the sawmill equipment; in Figure 4, this value is represented as the recovery point.
Figure 4. Estimate of the break-even point for the industrial investment project in the Basihuare ejido, Guachochi, Chihuahua. Source: Compiled by the authors with data calculated for the Basihuare ejido.
The EP of the investment project for the Basihuare ejido was measured by calculating the economic benefit acquired from the processing and marketing of products, using the calculations from 2019 to 2024. Based on a gross profit of 4 068 057 (average profit from 2019 to 2024) over the total assets in its average state of 6 653 659 (sum of gross profit and value of equipment and infrastructure depreciated to year five), it was estimated that the project is 61.14 % economically profitable.
Discussion
Velázquez-Martínez, Aldrete, Gómez-Guerrero, and Llanderal-Ocampo (2011) mention that the costs of timber products placed in the industry, including the necessary maneuvers, range from 524.00 MXN∙m-3 to 541.00 MXN∙m-3; Botard, Aguilar, Stelzer, Gallagher, and Dwyer (2015) estimated a mechanized extraction cost of hardwood in the state of Missouri of 31.34 USD∙t-1 (412.55 MXN at an average exchange rate of 13.16 MXN per USD for the year 2014). Finally, the Aboreachi ejido has production costs of 482.27 MXN∙m-3 log (Rascón-Solano et al., 2020). This indicates that the Basihuare ejido has high costs of extraction and supply of pine timber, being up to 48.43 % higher than the contrasting data.
In addition to the intagible costs, the loss of value of the sawmill over time is also considered. The depreciation of the equipment was calculated at a rate of 10 % per year, resulting in a devaluation of 2 585 602 MXN for the end of the established horizon (five years). The useful life and value of the equipment over time will be influenced by preventive maintenance and operator management. McConnell (2021) found that the effect of age on the recovery value of forestry equipment depends significantly on the size of the machine and that depreciation occurs at increasing rates depending on the useful life of the machine and the perception of brand recognition. Sahu, Narang, Sahu, and Sahu (2016) indicate that, as the useful life of machinery comes to an end, equipment replacement facilitates job safety, introduction and processing of better quality products, and higher production and profits.
According to the indicators recommended by Baca-Urbina (2013), the project is stable and can be carried out, because the profitability of its indicators was positive and proven in all the cases evaluated. The feasibility of this study is mainly influenced by the cost of raw material for sawn timber production, high administrative costs and ISR. Baardsen, Lien, and Størdal (2009) indicate that the profitability of timber supply in Norway decreases according to increasing wage income, increasing distance of timber harvesting, and fragmentation of forest ownership. Sawmill profitability also increases depending on roundwood diameters; coarse diameters allow the generation of a greater number or variety of products (Palma & Vergara, 2016) and usually have higher sawing coefficients and increase process efficiency (Nájera et al., 2011b).
Mete (2014) showed with graphs that NPV and IRR have a direct relationship and that some projects have different values for IRR depending on the profitability rates used. In the present research, the linear regression intercepts the NPV and IRR curve at the points that manifest their values; for this investment project it was estimated that when NPV is 16 194 605 MXN, IRR is 78.69 % on the Y-axis.
Akhtari, Sowlati, and Griess (2020) mention that economic viability is one of the main considerations in production projects and it is affected by uncertainty in availability, cost and quality of raw materials, as well as by the demand and prices of the products. Moreover, the present study considers production capacity as an basic factor in the economic viability of the project, because the indicators used are based on the capacity to produce sawn timber in a given time under an established cost. Rascón-Solano et al. (2019b) compared the BEP established based on the type of sale of sawn products, 280 and 50 thousand bf of Mill Run and graded timber, respectively, and demonstrated that the sale of graded timber helps to generate profits with a lower volume of roundwood transformed into sawn timber. According to this research, it was possible to determine the industrialized volume required to obtain profits; it is estimated that, from the generation of 1 520 255 bf, of different kinds, economic equilibrium is obtained. Rascón-Solano et al. (2019a) estimated a PBP of the investment of 1.67 years of processing activity based on an investment of 1 123 495 MXN; the Basihuare ejido requires a period of two years and 26 days of work (2.07 years) or the generation of 3 040 510 bf to recover the investment.
Conclusions
The investment project is possible for the Basihuare ejido. The implementation of the sawmill industry will generate at least 10 jobs for the ejidatarios; it will also ensure the permanence of the 110 jobs that are dedicated to the extraction and supply of raw materials. In addition to generating jobs for 56 % of the ejidatarios, the processing of the raw materials will generate cash flow at the ejido level with regional impact potential. The methodology used for the formulation and evaluation of investment projects in the forestry sector can be replicated and adapted to agrarian nuclei with different cultural, economic and environmental conditions, depending on the needs to be met.
