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Financial Analysis of a Tropical Forestry Enterprise

Realized in the Deramakot Reserve, Malaysia, by application of the forest growth model FORMIX3Q

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Sören Schopferer and Reinhold Glauner

This study analyzes the financial viability of three forest management scenarios for the Deramakot Forest Reserve in Sabah, Malaysia: Reduced Impact Logging (RIL), Low Impact Logging (LIL) and Conventional Logging (CL). Three sustainable Annual Allowable Cuts (AAC) were calculated with the process-based model FORMIX3Q. The study reveals that harvesting is feasible even under the current degraded conditions and suggests an AAC of 10,000 m3/year for at least 40 years. The integration of a costing module allowed combining the surveyed cost and revenue-related data of the harvesting scenarios with key data, e.g. the AAC, as well as a detailed analysis with financial indicators, and a sensitivity analysis. The module also provides the total balance sheet and internal cost distribution.
Contents: Log production and timber industries in Malaysia and Sabah – Investigation of the Deramakot Forestry Enterprise concerning infrastructure and accounting systems – Evaluation of a cost data bank – Structuring a costing module for the Deramakot Forestry Enterprise and integration in the process-based model FORMIX3Q – Financial viability of Reduced Impact Logging (RIL), Low Impact Logging (LIL) and Conventional Logging (CL) in the project – Sensitivity analysis concerning Annual Allowable Cut (AAC), timber price and discount rate – Evaluation of the balance sheet and internal cost distribution.