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Federated faces difficult year

In spite of a successful year at Federated Co-operatives Ltd., 2019 was wrought with challenges that invoked some soul searching among its members, said chief executive officer Scott Banda.

The challenges raised more than a few “prickly conversations” within the organization, he said, caused by ongoing events during an unsettled economic environment.

Despite the challenges of labour unrest and the Calgary Co-op, one of its largest members, opting to procure groceries from a different supplier, the company recorded revenues of $9.2 billion, which was down four percent from the previous year.

Net profit came in at $959 million, shy of the record $1.1 billion in 2018.

During FCL’s annual meeting in Saskatoon on March 2, nearly 300 delegates representing 168 local co-operative associations from across Western Canada reviewed the second-best financial year in FCL’s 91-year history.

From those earnings, $649 million was returned to local co-ops and their western Canadian communities, which was also down from its $789 million in 2018.

The remainder of FCL’s profitability stayed with Federated and was allocated for construction on a new $41.8 million high-throughput fertilizer terminal near Grassy Lake, Alta.; acquisition of Terra Grain Fuels’ 150 million litre-per-year ethanol plant near Belle Plaine, Sask., and $237 million in capital investments at the Co-op Refinery Complex.

A new farm stewardship program for agricultural producers was launched called Grown with Purpose, which assists crop planning and field operations for farmers who shop at Co-op Agro Centres across Western Canada.

FCL also invested $500,000 toward the Saskatchewan Food Industry Development Centre’s (Food Centre) expansion, which is designed to increase the locally grown food market in Western Canada.

“We had a solid year in the ag sector, no matter how challenging it was,” said Banda.

However, in spite of the collective success, a major setback came with the closure of the company’s Calgary Food Distribution Centre, which saw the loss of more than 200 employees, following the decision of the Calgary Co-op to source groceries from Save-On Foods instead of FCL.

“Calgary Co-op’s decision to move its food supply to a competitor was a sad moment in our 91-year history,” he said.

“The good news is many conversations were started in this federation arising from this disappointing event and I would suggest that these conversations are some of the richest and deepest conversations that we have ever had. Conversations about what is the purpose of this co-operative FCL. How do all of these responsibilities we all have collectively fit together and who plays what role?

“And most importantly, does this co-op matter?” he said.

An ongoing labour disruption continues at the Co-op Refining Complex in Regina involving FCL and Unifor Local 594.

The contract had expired in January 2019 and negotiations stalled primarily over proposed changes to the pension plan.

In December, the union gave strike notice and the company responded by locking out the more than 700 refinery workers.

Hindered truck access to the refinery and other facilities throughout January by locked-out workers delayed fuel shipments.

As a result, FCL temporarily capped the daily maximum to 300 litres of diesel and 100 litres of gasoline per card at Co-op cardlocks across Alberta, Saskatchewan and Manitoba from Feb. 5-12.

Soon after, the provincial government appointed Vince Ready as special mediator to assist in negotiations.

At last week’s annual meeting, Banda reported the distribution network is running smoothly with all Co-op cardlocks, gas bars and bulk plants at normal capacity.

“We had a period there where we had no access to move our product, but we’re back to where we need to be right now and we’re ready for seeding,” he said to reporters after his address to delegates.

Banda said it was too early to tell how boycotts and blockades have impacted the bottom line for the company as a whole.

“At a retail level we haven’t seen a drop in sales at all in Western Canada. And we’ve seen growth in some areas,” he said.

Banda would not say how bargaining is going since the special mediator was appointed.

“They’re very complex issues, especially when it relates to pensions. So I don’t know how that’s going to work, but all I can comment on is that our approach to this is to sit down, have robust, tough conversations and try and find a path forward,” he said.

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