UGG announced today that it had a seasonal net loss of $2.5 million for the third
quarter of the 2001 fiscal year, ending April 30, 2001. Through three quarters,
the Company had a modest net profit of $656,000. Year-to-date cash flow was as
high as it has ever been for the first nine months of a fiscal year.
UGG’s fiscal year has been affected by unusual seasonal shifts in the demand
for crop input products. Many farmers booked fertilizer earlier than usual,
to avoid the impact of escalating natural gas prices. UGG’s second quarter report
to shareholders cited this as one of the main reasons for the then strong results
from UGG’s Crop Production Services group. In the third quarter, Crop Production
Services sales were down 56%. "Some of this decline can be attributed to farmers
purchasing earlier than usual” said Brian Hayward, UGG’s CEO. "However, an
estimated 25% decline in canola acres has had an additional impact on seed sales
and earnings. Planting conditions, particularly in Alberta and Manitoba, were
also less than ideal in March and April, delaying the spring season.”
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Crop Production Services gross profit for the quarter declined by $7.6 million
as a result – clearly the main factor in quarterly operating income for Crop
Production Services being $9.0 million lower than the same quarter of fiscal
2000. Through nine months, Crop Production Services had a seasonal loss of $8.5
million, compared to $3.4 million in the same period of the preceding fiscal
year. Normally, just under two-thirds of Crop Production Services annual sales
come in the final (May to July) quarter.
Grain Operations had a reasonably strong quarter-quarterly operating income
of $6.3 million was $3.5 million ahead of the third quarter of fiscal 2000.
Year-to-date earnings of $19.7 million for this segment now exceed the complete
fiscal year 2000 results by almost 30% – with one quarter to go. This improvement,
on similar volumes to last year, is due to a variety of factors – including
ongoing expense reductions, margin improvements, and effective execution of
sales programs.
Livestock Services continued to perform well – year-to-date operating income
of $7.6 million was a nine-months record. The latest quarter was, however, slightly
softer than the very strong third quarter of fiscal 2000. UGG’s new feed mill
at Olds, Alberta has been commissioned; Company earnings are benefiting from
the recent acquisition of assets of Pro Form Feeds of Chilliwack, British Columbia;
and UGG’s investment in Puratone (hog production and feed group) has also performed
well.
Farm Business Communications results were slightly below last year, due to
weakness in advertising markets-attributable to the continued low-price environment
in grain and oilseed markets.
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By GlobalDataDespite the recent soft market for farm inputs, UGG’s gross profit for the
nine months increased by 4.6% to $142 million. Expenses were well contained-excluding
the impact of the Pro Form Feeds acquisition, UGG’s operating, general, and
administrative expenses were flat with last year. Earnings before interest,
taxes and depreciation (EBITDA) were $27.7 million through nine months of the
fiscal year-up 20% from fiscal 2000. For the quarter, EBITDA was off $5 million
at $6.4 million-largely due to the slower market for farm inputs in March and
April. Although cash flow from operations for the quarter was down on the previous
year for the same reason, for nine months it was $17.8 million, up 22% from
the same period last fiscal year.
Net income has been positively affected by a (non-cash) release of $5.45 million
relating to future income tax liabilities. Through nine months, the Company
had a loss per share of $0.01, compared to a loss of $0.37 in the previous year.
Cash flow per share of $1.01 through three quarters was up 23% from $0.82 recorded
in the same period of last fiscal year. Capital expenditures remain well below
last year-management is following through on its stated strategy of ensuring
that cash flow exceeds capital expenditure. "UGG’s balance sheet is improving”
said Hayward. "Long-term debt has been reduced and the implementation of the
UGG Financial strategic initiative (with Scotiabank) will drive short-term debt
down by the fiscal year-end”.
UGG is one of western Canada’s largest agribusiness firms. Founded in 1906,
the Winnipeg-based company is diversified into grain merchandising, crop input
sales and distribution, livestock production services, and farm business communications.
UGG is publicly traded on the Toronto Stock Exchange under the symbol "UGG”.
For further information on UGG, contact Company web sites at www.ugg.com
or www.ugginvestor.com.
