Alliance Grain Traders eyes food processing options

The pulse exporter is finding a niche in gluten-free, high fibre food ingredients

Alliance Grain Traders says its focus on packaged food and food in-gredients can help shelter it from volatile commodity markets.

“The customers in both of these platforms, food ingredient and packaged foods, are highly specialized and appear to be less susceptible to the cyclical patterns in the global commodity business,” Murad Al-Katib of Alliance Grain Traders said during a conference call with investors last week.

Recent moves by the company, including the purchase of Quebec-based food packager and distributor CLIC International, signal a shift from AGT’s traditional business as a commodity exporter.

The special crop processor has offices and facilities in Canada, the United States, Turkey, China, Australia and South Africa and markets branded products internationally, including pasta.

AGT has said the CLIC acquisition will allow it to distribute pulses and ethnic food within North America through its listings with retailers.

The company is also in the final stages of commissioning a second production line at its food ingredient production facility in Minot, North Dakota. The facility produces pulse proteins, fibres, starches and flour for food, feed and pet food.

The second line doubles the plant’s production capacity, adding a further 35,000 tonnes. A third line may also be added.

AGT is targeting food companies looking for non-genetically modified, gluten-free ingredients with attractive protein and fibre profiles.

“The way this works is a food company will take one tonne and then they’ll take five tonnes and they go into a pilot production and then they take commercial quantities,” said Al-Katib.

“We’re starting to get to a point where we have a number of users that are starting to take some commercial quantities. We’re optimistic.”

The company has a multi-year agreement with Cargill to supply pulse proteins for animal feed.

Al-Katib said the highest profit margins will come from pet food, aquaculture and products for human consumption.

“Once we have a food company that is integrating that ingredient into a formulation, we end up in a position where we have very sticky revenue and sticky margins that are not susceptible to macro-economic fluctuations,” he said.

“It’s really only tied to the sale of the products. We like that profile compared to what we do normally.”

AGT reported improved financial results last year, despite the transportation backlog that has kept much of Western Canada’s crop at the farm-gate.

Al-Katib said the rail backlog experienced in Western Canada took $1.5 to $2 million from the company’s earnings at the end of last year.

AGT reported earnings before interest, taxes, depreciation and amortization of $60 million for 2013, up from $39.4 million for 2012.

Al-Katib was optimistic that government mandated remedies and a resolution to the truckers strike at the Port of Vancouver would help address the backlog.

“In terms of what we’ve done to mitigate, we’re using all the gateways. We have cargo moving to Montreal. We have cargo moving out of Halifax (and) Vancouver. We shipped it into the U.S. utilizing U.S. ports of Seattle and Tacoma,” he said.

“We’re expecting an active program using Montreal, Thunder Bay and others going forward as well. We’re using all options — containers, intermodals, rail cars — to keep the factories running to the best of our ability.”

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