After five years of flailing below the surface, Saskatchewan Wheat Pool has poked its head above water.
The pool last week reported its first annual profit in six years, announcing a net earning of $5.02 million for the year ending July 31, 2004.
That’s a far cry from the $47 million annual profits the company regularly churned out in the mid-1990s. But it’s also a dramatic improvement from the staggering losses the company incurred in more recent times: $50.3 million last year, $92.2 million the year before that and an average annual loss of $55 million in the five years ending July 31, 2003.
Read Also
U.S. loses out on sales of soybean to China
U.S. soybean exporters risk missing out on billions of dollars worth of sales to China this year as trade talks drag on and buyers in the top oilseed importer lock in cargoes from Brazil.
Things got so bad that the pool was teetering on the edge of bankruptcy, a disaster averted only by a massive financial restructuring in January 2003.
Pool president Terry Baker said the black bottom line is a big psychological boost for pool employees, members and customers, who have all suffered through discouraging times.
“I think everybody is uniformly pleased with the results of the last year, particularly keeping in mind the difficulties we went through and the situation we found ourselves in as late as last February,” he said.
He credited the turnaround to a team effort involving management, directors, delegates, front line employees, farmers, end-use customers and investors.
“I give full credit to people in the country who had faith and weathered the storm with us, and I hope now that as an organization we’ll be able to reward their confidence with a higher level of service,” he said.
Ben Chim, a grain industry analyst for Dominion Bond Rating Service, described the pool’s 2003-04 results as encouraging.
The company generated enough cash flow to cover its costs, even with a below-normal crop, and that bodes well for the future.
“I’m not sure they could withstand another big drought, but if crops are simply not up to normal levels they can withstand that and that gives us some comfort,” he said.
The pool’s positive financial news was also welcomed by grain industry observers, who said a viable and competitive Saskatchewan Wheat Pool is important.
“The grain industry in most of the world is dominated by a few big multinationals,” said Richard Gray, an agricultural economist at the University of Saskatchewan. “Western Canada is an exception to that, largely due to the presence of the pool.”
While the pool is no longer the integral part of the agricultural and rural fabric of Saskatchewan that it once was, farmers still want to see the company survive and prosper, says a provincial farm group official.
The more companies that compete for farmers’ business, the better off farmers are, said Terry Hildebrandt, president of Agricultural Producers Association of Saskatchewan.
And, he said, many farmers still have a sense of loyalty to the pool, despite the contentious changes it has been through in the past decade.
“There aren’t too many over the age of 40 who weren’t involved in that company in one way or another,” said Hildebrandt.
The pool alienated many long-time loyal customers when it switched from being a farmer-owned and controlled co-operative to a publicly traded company in 1996.
At the same time, the company embarked on an ambitious expansion program, spending $270 million to build 22 high volume elevators across Western Canada, while at the same time closing hundreds of small, local facilities.
The company also made major investments in overseas grain handling facilities, grain and oilseed processing, the hog industry and the retail food business.
By 1999, the bottom had fallen out of the agricultural economy and the pool found itself wallowing in debt.
Pool chief executive officer Mayo Schmidt, who was hired in 2000 to try to turn things around, said the company succeeded by developing an aggressive recovery plan and sticking to it.
That included reducing annual costs by $80 million, selling 31 businesses to focus on core grain handling and processing operations, and forming strategic alliances to insulate the company from uncontrollable events like the weather.
Debt reduction will continue to be the main focus of the pool’s financial strategy for the next few years, Schmidt said, although he added the company will also look for “managed growth opportunities.”
