Last year’s average crop has given Agricore United and the grain industry what it needed: something to haul and something to make a buck on.
“The first quarter 2004, I think, reflects a real turning point in the agricultural industry and Agricore United,” said AU chief executive officer Brian Hayward in a news conference announcing the quarterly financial results.
“We are ready for a busy year.”
AU posted a $12.7 million net loss for the quarter that ended Jan. 31, an improvement of $6.9 million over the loss of $19.6 million in the same quarter last year.
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The company increased its grain handle by 53 percent over the same period last year, which trailed the overall industry’s 63 percent increase. Its market share of prairie grain handlings fell to 33 percent, but over the 12 months the company’s share has increased from 34 to 35 percent.
If the financial year had ended on Jan. 31, the company would have recorded a net profit of $4.6 million – the first time it would have recorded a net profit since the merger of United Grain Growers and Agricore. That $4.6 million profit was helped by the $11 million gain from the sale of Farm Business Communications.
“We actually now are back in the black,” said Hayward. He said AU would be “highly likely” to make a net profit for the year ending Oct. 31.
He said most of the operating efficiencies gained from merging the two original grain companies had been kept. Even though the amount of grain handled increased by 53 percent, the company’s operating costs did not rise.
“Our cash expenses have remained flat despite the increased level of grain activity,” said Hayward.
AU’s margin fell from $22.53 per tonne in the first quarter of 2003, to $20.56 per tonne in the first quarter of this year. Hayward said there was aggressive competition in canola marketing this year, and since Canadian Wheat Board shipments were slow in the first quarter, tighter canola margins meant an overall drop in grain handling margin.
Hayward said he was excited about the prospect of more, higher-margin, board grain shipments in the spring and summer.
“I’m very bullish about the board’s movement outlook for the next six months,” said Hayward.
The improved results and optimistic outlook by AU did not surprise Dominion Bond Rating Service analyst Ben Chim.
“With the average crop, this is what we said would happen,” said Chim.
“It is better times for AU and Sask Pool.”
