Agricore United will rebound from disappointing financial results, frost and slow fall farm supply sales, chief executive officer Brian Hayward said last week in Regina.
“I don’t want to try to sugarcoat something,” he told reporters after a speech at the AU annual meeting Feb. 9. “This is not what we’re capable of doing.”
Hayward said the farmer shareholders at the meeting understand, because they experienced the same thing.
“They’re looking at it saying, ‘I know I’m a better farmer than what I just did, and I’m going to stay in this game for five, 10, 15 years and take the good years with the bad.’ “
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AU lost $13.7 million in its last fiscal year, but Hayward said the company, at age three, is performing pretty well. The company was formed out of a merger between Agricore and United Grain Growers.
The total net debt load has dropped since the company was formed, from $750 million to $443 million. It still carries more than $60 million in depreciation from construction of high throughput elevators in the late 1990s. If that is taken out of the equation, the company is generating good cash flow, he said. Cash flow over three years was $125 million.
Hayward said AU is in a position to take advantage of another round of industry consolidation.
“There’s nothing specific I’m alluding to other than to say we have a cost structure that is scalable,” he said when asked by a reporter. “We can go and have more retail outlets, better presence in some areas of the Prairies, and it’s not going to add to our research and development budget or human resource budget.
“We’re underrepresented in some areas, just by the way the two companies came together.”
He declined to comment on Saskatchewan Wheat Pool’s capital market initiative and move to a single class of shareholders, and whether that presented an opportunity for AU.
In the shorter term, he said although “nothing pencils out right now” farmers appear optimistic about the growing season ahead.
However, an inventory problem is affecting prices. World wheat production exceeded consumption by 70 million tonnes, or three times the size of the entire western Canadian harvest.
“I think what the world has to deal with is (to) chomp its way through that stockpile of grain that’s out there in the marketplace,” Hayward said, adding that the best cure for low prices is low prices because it stimulates consumption.
He said AU’s vision is to be a link between technology developers and end use markets, which in turn creates value for farmers and everyone else.
As examples, he highlighted the Warburton’s wheat program, navy beans used for the Heinz line of baked beans in the United Kingdom, and the only brown mustard program in Canada developed with Unilever.
“While most people think of Agricore United as a prairie company, the fact is that we have global reach,” he said.
