The slowest exports of wheat and flour in 24 years is hitting Saskatchewan Wheat Pool’s balance sheet, but the company’s investment in agricultural processing is partly offsetting the pain.
The pool’s second-quarter report for the three months ending Jan. 31 shows a net loss of $700,000, or two cents a share, after a special after-tax restructuring charge of $2.5 million related to changes made at CSP Foods.Total sales for Sask Pool were $944.9 million.
In the same quarter last year, the company had net earnings of $7.2 million on sales of $988.2 million.
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Earnings before interest, taxes, depreciation and amortization, seen by analysts as a key indicator of financial health, were $17.9 million, down from $26.5 million in the same quarter last year.
Volume of grain handled at primary elevators in the first six months was 4.27 million tonnes, down 25 percent from last year in the same period.
Port handlings were 2.9 million tonnes, down 35 percent from last year.
Don Loewen, the pool’s chief executive officer, said he was disappointed when it became clear the wheat board would have to scale back sales so much.
“It has been a fairly tough year to manage our way through the challenges facing us,” he said.
“Boy oh boy, their sales are down so far, it really hurts.”
Last year, board grains made up 70 percent of the volume the company handled. This year its share is about 60 percent as oilseeds, pulses and special crops make up a bigger piece of the grain handling pie.
As a result, the pool’s grain handling and marketing business segment posted a loss of $400,000 before corporate taxes for the second quarter, compared to earnings of $9.4 million in the same period last year.
The situation was different on the food processing side of the business, which includes investments in oilseed crusher CanAmera Foods, hog processor Fletcher’s Fine Foods, bakery products maker CSP Foods and others.
Before restructuring costs and corporate taxes, food processing had earnings of $10.4 million compared to $6.6 million in the same quarter last year.
“We’ve had very good results from Fletcher’s and CanAmera. We continue to rely on our diversification and integration strategy to help us find markets for our grains and oilseeds and produce profits that the marketplace provides from good sound integration,” Loewen said.
The food processing segment took a onetime $4.5 million charge in the quarter for restructuring of CSP Foods. In January the company said it was closing two bakery products plants in Ontario and Quebec, centralizing operations in Etobicoke, Ont.
The farm supply business had pre-tax earnings of $5.4 million compared to $7.1 million in the same quarter last year.
Loewen said despite the tight financial situation farmers face, he still expects the co-operative will see good business in the critical spring period when farmers make their major purchases of seed and crop inputs.
“Just because you’ve got a year of low movement, farmers still have to plant a crop. They need the inputs.”
And the changing crop mix and management styles of farmers mean more money might be spent. For example, canola acreage is forecast to increase and it requires more inputs than do cereals, he said. Also positive is the fact soil moisture conditions are better than they were last year at this time.
The livestock marketing segment saw pre-tax earnings of $100,000 compared to $1.8 million last year in the second quarter. The lower number was due mainly to weak hog prices.
Publishing and other business, the segment that includes The Western Producer, had pre-tax earnings of $500,000, the same amount as last year in the second quarter.
The pool is focusing on cost control. Corporate expenses in the first six months were $12.4 million, down from $13.4 million last year in the same period.
But Loewen said the difficult financial year has not changed the company’s expansion plans, called Project Horizon, and construction remains ahead of schedule. The $270 million project will build 22 high-volume grain handling and marketing facilities in Western Canada.
