Alliance Grain Traders Inc. is tightening its belt in the wake of another poor quarter by delaying its Regina pasta plant project.
Canada’s largest pulse processor posted sales of $197.4 million for the first quarter of 2012, down from $231.5 million in the fourth quarter of 2011.
Earnings before income, taxes, depreciation and amortization were $6.1 million in the first quarter of 2012 compared to $14.2 million in the fourth quarter of 2011.
“This quarter has certainly been a disappointing one for our company. We collectively see the potential for recovery in the near-term and we firmly believe it will come,” Alliance president Murad Al-Katib told analysts and reporters during a conference call.
Read Also
Manitoba Parkland research station grapples with dry year
Drought conditions in northwestern Manitoba have forced researchers at the Parkland Crop Diversification Foundation to terminate some projects and reseed others.
A number of analysts immediately cut their share price targets for the Regina firm.
Shares of Alliance closed at $10.70 May 14, down 14 percent since the close May 9, the day before the results were released.
Al-Katib said construction of the company’s proposed $50 million Regina durum mill and pasta plant has been delayed by a year until 2013.
The plant was trumpeted by the federal government as proof that the removal of the CWB’s export monopoly on wheat and barley would lead to increased value-added activity on the Prairies.
“Obviously the management of Alliance Grain Trader has now done its due diligence and discovered what grain farmers have known for decades — any kind of enterprise in the West faces brutal transportation economics simply because we are so far from any significant markets,” said Bill Gehl, chair of the Canadian Wheat Board Alliance.
“They may have even discovered that with the loss of the wheat board’s single desk, small processors face an even bigger challenge.”
Alliance said it is focusing on running its existing assets.
The only big capital project on the horizon is the commissioning of the company’s pulse processing and food ingredient facility in Minot, North Dakota.
The company’s North American processing facilities have been running at 50 percent capacity and handling low margin products such as whole peas, flax and canaryseed.
Al-Katib is confident those plants will be operating at two-thirds capacity during the second half of 2012, processing higher value products such as split and colour-sorted lentils, chickpeas, beans and value-added peas.
Staffing and overhead expenses have been scaled back, but the company has retained key personnel in anticipation of market recovery in the coming quarters.
“You can be sure we’re ready for this,” said Al-Katib.
There are signs that India and Turkey could be in the market for pulses earlier than normal because of short crops.
There are also pending supply problems in Bangladesh, Pakistan and Myanmar.
“Markets are signalling a potential restart of normalized demand,” said Al-Katib.
Importers appear to have better access to the capital required to clear cargo than they have had during the past couple of quarters.
He believes the second quarter will be a period of transition back to normalized sales.
Al-Katib emphasized that the Regina pasta project is still a go.
“Planning and design will continue so we’ll be ready for implementation when we feel the time is right to do so,” he said.
In the House of Commons May 14, Pat Martin, New Democratic Party critic on the Canadian Wheat Board file, accused the Conservatives of trying to take credit for the Alliance pasta plant announcement while undermining grain markets with the destruction of the CWB single desk. Alliance cited uncertainty in grain markets for delaying the project.
Agriculture minister Gerry Ritz dismissed the idea, blaming European economic turmoil.
“Unfortunately with the environment in Europe, their major market is stagnant at this point,” he said.
“They have decided to delay movement on the … processing facility but they look forward to the day when they can put shovels in the ground and put that facility right near Regina.”
