The cost-efficient reutilization of byproduct materials is a significant global goal, contributing towards the sustainable use of resources. In this study, the effects of including primary sludge in composite materials on their physical performance are examined, in order to achieve more effective reuse. The studied materials were made from high-density polyethylene (HDPE), anhydride-grafted polyethylene (MAPE), lubricants, and either wood flour from spruce (Picea abies) or primary sludge from the side-stream of forest industry processes as a filler. The materials were compounded by agglomeration, followed by manufacturing with a conical twin-screw extruder. The physical properties of the materials were characterized by water absorption and thickness swelling tests; furthermore, impact strength was characterized after the stress of a cyclic freeze-thawing test. The elemental compositions of the materials were also analyzed by scanning electron microscopy coupled with energy-dispersive X-ray spectroscopy (SEM-EDS). Primary sludge, as a component in the structure of the composite material, resulted in a significant improvement of moisture behaviors in the water absorption and thickness swelling tests. The identified results demonstrate that primary sludge is a technically applicable material for utilization in composite materials.