The massive canola crushing plant on the outskirts of Ste. Agathe, Man., may crank to life after all.
The Canadian Agra Foods Inc. facility survived under the crushing weight of a flood, financial foul-ups and corporate setbacks that have plagued the idle plant for almost a year.
If everything goes according to plan, Canadian Agra said in its January annual report the $42-million facility should start crushing its first canola by the end of this month.
“We believe we have bottomed and we are currently focused on the completion of the restructuring, which includes the refinancing, the sale of discontinued operations and the start-up of the new oilseed crushing plant in Ste. Agathe,” Helmut Sieber, chair and chief executive officer, is quoted as saying in the annual report.
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Canadian Agra director James Conners did not return phone calls.
The company reported a net loss of $34 million on last year’s sales of $4.2 million. Of that, $27 million was eaten up by the decision to shut down operations in Sexsmith, Alta., and British Columbia.
Adverse crush margins and rebuilding after the Red River Flood also added to the company’s losses, the report said.
To add to the problem, the Bank of Nova Scotia wants the company to find a new lender, and Ellis-Don Construction, the main contractor for the Ste. Agathe plant, has a lien for $8.3 million still owed for the job.
“As a result of the above matters, particularly the absence of current financial support from the company’s main lender, the inability to complete the Ste. Agathe facility and the lack of a strategic partner … there is significant doubt that the company will be able to continue as a going concern under the current circumstances,” said the report.
Some are skeptical
The announcement to crank up the Ste. Agathe plant looks good on paper, but some analysts say with the company’s troubled recent past, the industry will have to see it to
believe it.
“There obviously are some problems there and I guess the first question is whether it will actually be opened when it is scheduled,” said Charlie Pearson of Growers’ Marketing Service.
“They know their situation and have made some announcements but the industry will probably have to see it happen.”
The company also announced once the plant is up and running, it has struck a deal to sell all oil produced there to Singapore-based Gardner Smith, an agricultural based edible oil refinery, marketing and distribution company with a network throughout southeast Asia.
The $390 million contract will run over three years, said a company news release.
Pearson said the deal could offer the company a chance to expand into new markets.
“Obviously there’s good demand out of southeast Asia, in the short-term anyways,” he said. “There’s some concerns about palm oil and the impact of El Nino on palm oil production so there’s probably some demand to be had there.”
The Ste. Agathe plant is North America’s largest non-solvent, double press canola crushing operation with initial processing volumes of 1,000 tonnes of seed per day in the first stage.
News of the supply agreement saw Canadian Agra’s shares open on the Toronto Stock Exchange in light volume at 75 cents. The highest it ever traded was $1.94 and lowest was 30 cents.
“This may signal they’re lining up clients. They’re producing a unique product that uses little to no chemicals in the extraction process but you wonder how large that niche market is,” said University of Manitoba economist Daryl Kraft.
The absence of solvents from the extraction process may be a boon to Canadian Agra if it chooses to pursue the European market, Kraft added.
The European Union has been in a protracted battle with American and Canadian oilseed exporters over the production of genetically modified organisms, citing a preference for organic food.
