Rains at the beginning and end of the 2010 growing season watered down profits for Canada’s largest pulse processing company.
Alliance Grain Traders Inc. released its 2010 year-end results Wednesday showing sales were up but earnings were down compared to 2009.
The company posted sales of $642.1 million in 2010, up from $387.9 million in 2009. EBITDA fell to $37.2 million from $45.5 million over that same period.
“Certainly we’re disappointed with these results,” Alliance president Murad Al-Katib told investment analysts and media during a Mar. 30 conference call.
He assured analysts the poor financial results were due to a one-year weather anomaly that destroyed lentil quality in Canada, where the global company still sources most of its product.
Al-Katib said 25 percent of the crop made the top two grades as opposed to 75 percent in a normal year.
Farmers were able to use Act of God clauses in their contracts to release themselves from their delivery obligations, forcing Alliance to buy No. 1 and No. 2 product on the spot market.
“We had to pay significantly higher prices than contracted prices to deliver our sales commitments,” said Al-Katib.
He told analysts that being forced to fill contracts with supplies purchased on the spot market cost the company millions of dollars in the fourth quarter of 2010 but those contracts have now been fully executed.
Al-Katib is forecasting a better year in 2011 with increased plant capacity utilization, strong foreign demand and improved margins.
“We have prided ourselves as a growing company and we continue to see ourselves in that light,” he said.
Early indications are pointing towards reduced lentil production in India due to severe frosts in January. Importers have been buying product during the first three months of 2011, which is traditionally a slow period for sales to that destination.
Further details on Alliance’s 2010 results and the company’s lentil demand outlook will be provided in the April 7 edition of The Western Producer.
