Regina, Saskatchewan-based agribusiness cooperative Saskatchewan Wheat Pool (SWP) reported positive performance during its Q2 in terms of meeting its priorities of strengthening its balance sheet and maximising core operations.
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SWP’s focus on debt reduction has resulted in a C$157m (US$98.4m) decline in debt at 31 January 2002 compared to 31 January 2001. In addition, a continued emphasis on driving efficiencies through its network of modern grain-handling and agri-products marketing facilities has resulted in higher quarterly volumes, year-over-year market share growth and a reduction in core operating costs of C$19m in the first six months of this year.
“Our board, management and employees are to be commended for their commitment to execution,” says CEO Mayo Schmidt. “In spite of last summer’s drought, we shipped more grain through our primary system in the Q2 by maximizing our multi-car loaders and successfully achieving one-third of the volumes tendered through the Canadian Wheat Board.
“We improved Q2 operating earnings (EBIT) in both our grain handling and retail agri-products operations by exceeding our cost reduction targets. Our front-line employees have embraced our customer service strategies and we have experienced market share growth of 4% in the first six months, bringing our western Canadian market share to 22.3%. And we are seeing the same kind of results at our oat processing operation, Can-Oat Milling which continues to grow its operating earnings each quarter.”
EBITDA for the Q2 was C$17.7m compared to C$22.4m in the previous year. EBITDA declines in non-controlled affiliates, CanAmera Foods and Western Co-operative Fertilizes Ltd., and the livestock segment were partially offset by Can-Oat’s growth and an 8% increase from the Grain segment. Year-to-date EBITDA was C$34.7m compared to C$53.8m a year earlier.
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By GlobalDataThe Q2 operating loss, prior to interest, securitisation, taxes (EBIT) and provisions was C$1.1m compared to earnings of C$3.3m a year earlier. On a year-to-date basis, EBIT was a loss of C$1.9m compared to earnings of C$15.9m last year.
SWP’s Q2 loss, prior to provisions and unusual items was C$12.8m, C$0.34/share, just C$1.9m off last year’s Q2. On a year to date basis, the pre-provision loss was C$28.5m or C$0.76 per share compared to a C$16.5m loss last year or C$0.44 per share.
SWP recorded a number of provisions in its Q2 including: a C$8.5m gain for the sale of its publishing assets, a C$8.2m loss on sale for feed assets, and a C$13.5m impairment in value of CSP Foods Division, which was sold subsequent to the end of the Q2. All numbers appear after-tax.
The consolidated net loss for the quarter was C$26m, C$0.69/share, compared to a C$18.5m loss or C$0.49 per share in the Q2 of fiscal 2001. On a year-to-date basis, the net loss was C$38.4m, C$1.03/share, compared to a C$24.1m loss, C$0.64/share, year on year.
SWP’s primary shipments for the Q2 were up 40,000 tonnes to 2.2 million tonnes, for a year-to-date total of 4.2 million tonnes. For the first six months, shipments were off by only 2.6%, well ahead of industry shipments that were down 14%. Volume through SWP’s wholly-owned Port terminal in Vancouver were down 4.9%, which compares favourably to the industry which experienced a 13% decline in volumes of the six major grains through the port. Including the Pool’s Thunder Bay terminal, total port terminals were down 12.7% on a year-to-date basis.
Grain segment EBITDA for the quarter was C$11.3m up from C$10.4m last year while EBIT for the quarter rose by 54% from C$1.7 to C$2.7m compared to last year. Year-to-date EBITDA was C$22.1m compared to C$24.4m, and EBIT was C$5.9m compared to C$7.2m last year. The decline reflects a change in commodity mix due to the drought last fall partially offset by significant cost reductions and increased market share.
A shift in buying patterns by producers, who pre-bought fertiliser in the fall and early winter of 2000 along with lower fertiliser prices this year resulted in agri-product sales declines for both the Pool and Western Co-operative Fertilizers Ltd. However, the Pool’s retail operation maintained its EBITDA and EBIT contribution in the three and six months by implementing cost containment strategies. The earnings variances for both periods reflect lower results from Western Co-operative Fertilizers, which suffered from decreased volumes and selling prices for urea and ammonia.
The agri-food segment saw sales increases for both the quarter and six-month periods. Significant improvements in EBITDA and EBIT by Can-Oat Milling and Prairie Malt Limited were reflected in both the quarter and year-to-date periods. However, affiliate CanAmera Foods, which is typically the segment’s largest contributor, continued to lag last year. The lack of canola supplies from last year’s drought, coupled with low canola crushing margins have had a significant impact on their results this year.
Cash flow from operations in the quarter was C$1.3m, C$0.04/share, compared to C$1.9m, C$0.05/share in the Q2 last year. For the six months, cash used in operations was C$4.8m compared to cash generated of C$14.4m last year. The decline is largely related to the drop in earnings caused by poorer results from CanAmera and Western Co-operative Fertilizers.
“2002 will continue to be a challenging year for the Canadian agricultural sector due to significant production declines, the uncertainty with weather and the volatility in prices,” says Schmidt. “SWP’s management, however, has demonstrated our ability to operate successfully under such conditions and will continue to execute our business plan to restore profitability.”
