Despite what it describes as “cut-throat competition” in the grain handling industry, North West Terminal Ltd. has turned a profit in the first half of its 2003-04 fiscal year.
The farmer-owned grain company, located east of Unity, Sask., has reported net income of $121,622, or 14 cents per share, on gross revenue of $16.7 million for the six months ending April 30, 2004.
That’s a significant improvement from the same period a year earlier, when the company recorded a net loss of $246,454, or 29 cents per share, on revenues of $10.1 million.
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NWT president Bob Cumming said the company is pleased with the improvement, which he attributed to increased grain shipments.
“Anytime you can make money in an industry where your competitors continue to insist on cutting their margins to the point where they are losing money, you have to be happy,” he said.
NWT general manager Jason Skinner said there is strong competition among grain handlers in bids offered on Canadian Wheat Board tenders and in trucking premiums and other incentives offered to farmers to attract grain.
The big grain companies are competing for market share and ignoring their bottom lines, he said, adding the nature of the tendering system makes it difficult to determine whether one particular grain company is leading the charge.
“Some of the rates you see out there do not support profitability for the industry,” he said.
“Companies certainly aren’t making money if they’re bidding at those levels.”
Smaller companies such as NWT have no choice but to meet the competition, which reduces margins and profits to barely acceptable levels.
“From a return on assets, we’re not making what we should be making if we were in a different industry,” Skinner said.
As for the rest of this fiscal year, which ends Oct. 31, Skinner said the outlook is reasonably good.
He expects a strong grain shipping program through to the end of the crop year and with a decent-looking crop in the ground, there should be good volumes to handle in September and October.
“Given current circumstances, we’re expecting to see a profit this year,” he said.
Last year the company recorded a net loss of about $400,000.
