Agricore moved more grain last crop year, and made more money doing it.
But despite that improvement in its core business, the company reported its second consecutive disappointing financial result last week.
The Winnipeg-based grain firm posted net earnings of $1.3 million on sales of $3 billion for the fiscal year ending July 31, slightly ahead of the $900,000 profit it made in 1998-99.
“That’s two years in a row of almost no income, so these are not two exciting years,” said chief executive officer Gordon Cummings.
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The company had originally budgeted for earnings of around $20 million, but it soon became apparent that wasn’t in the cards.
Grain volumes were close to the company’s projections, but profit margins were squeezed by intense competition among prairie
handlers.
Cummings said the discounts Agricore offered to attract business were greater than it had budgeted.
“With prices so low, farmers were quite reasonably pushing us a lot harder, pushing us for the last nickel, and I can’t blame them at all.”
Agricore won’t release a detailed financial statement until its annual delegates meeting in Winnipeg later this fall.
However, it did report that it handled 8.1 million tonnes of grain through its country elevators, up 5.2 percent from 7.7 million tonnes the previous year. Terminal handlings, including its share of jointly owned facilities at Prince Rupert and Vancouver, were 19 percent higher at 7.6 million tonnes.
Earnings before interest, taxes and depreciation were $52.8 million on grain handling, up 6.9 percent from last year, and $56.7 million on sales of agro products, a drop of 6.9 percent.
Revenues of $560 million made Agricore the leading retailer of crop inputs and related
services.
Loss of market share
Cummings said two special circumstances made for a challenging year:
nAgricore lost market share in Manitoba because it has lagged behind its competitors in opening new high volume elevators in that province.
- Business was disrupted by a four-week elevator workers’ strike last fall.
Cummings declined to attach a financial cost to the strike, but said it cost the company market share.
That loss helps account for the fact that while Agricore’s primary elevator handlings increased by 5.2 percent, it was outstripped by competitors like United Grain Growers (an 8.9 percent increase) and Sask-atchewan Wheat Pool (7.6 percent).
The good news is that Agricore’s market share is up in the first seven weeks of the new crop year. With five new high volume elevators opening for business this year (three in Saskatchewan and two in Manitoba) and two more under construction (one in Saskatchewan and one in Alberta), Cummings thinks the company will be able to gain back that lost business.
“I’m relatively pleased with where we are vis-a-vis the competition,” he said.
“We are now in a position to compete whatever the market conditions.”
Agricore closed about 50 old elevators last year and more closures are in the offing, although Cummings declined to say how many.
Capital spending will be down sharply, at less than $50 million, compared with $121 million last year and $177 million two years ago.
