Reduced fuel demand because of COVID-19 creates one of the most difficult financial years in the co-op’s recent history
This past year was an economically challenging one for Federated Co-operatives Ltd., but some bright areas emerged.
“From a specific Federated Co-op business level, put energy aside, which was a terrible year in the whole energy sector and all components of it, our food business did very well, our home and building supply business did very well, our agricultural based businesses — fertilizer, crop protection — all did reasonably well,” said Scott Banda, FCL chief executive officer.
“Those are things that had to continue. We continue to eat and continue to grow food and we supported that in our local co-ops. And I think overall that was really an outstanding effort.”
Revenue of $7.9 billion was recorded for the financial year that ended Oct. 31, with earnings of $177 million. From these earnings, FCL returned $117.5 million to local co-ops across Western Canada.
At the same time last year, revenues were $9.2 billion, earnings were $959 million with $649 million returned to local co-ops.
By far, revenues in the energy market were significantly reduced by the lack of fuel demand because of COVID-19, which Banda said created one of the most difficult financial years in the co-operative’s recent history.
“At a high level, our earnings were down 80 percent year over year, and that’s entirely an energy story. The refinery alone, we’re pushing around the $800 million mark down year over year,” he said.
However, even pre-COVID, FCL was experiencing pricing challenges due to the market-share battle between Russia and Saudi Arabia that pushed oil prices down.
“You take away the demand, you lower the price. There’s no need to produce fuel that you can’t sell and that was a big challenge for us in 2020,” he said.
“We’re heavily laden in the energy side and when we take the massive hit we do on the energy side it doesn’t take us out of the game. We have other businesses that are critical and I’m thankful for that diversity,” he said.
Growth in food sales led the way at FCL as many people ate from home instead of out at restaurants.
“We’re heavily weighted to rural communities versus larger urban ones and as a result a lot of people stayed home in their communities and shopped local. As a result our food sales were up and the profitability was up as well in 2020,” he said.
The building supply business also profited, largely fueled by a boom in home building projects.
“The first half of the year was pretty normal, but that back half of our fiscal year, which is Oct. 31, the do-it-your-self projects really took off and that business had a good year as well,” he said.
Overall, Banda is pleased with sales in the agriculture sector, which represented $8 billion in sales, about 10 percent of FCL’s business.
“Our fertilizer business continues to grow, our crop protection, seed and ag equipment all had a very good year at the sales level.
“Our local co-op did a heck of a job out there servicing the producers. It’s an area we’ve been focusing on now for five, six, seven years here where we’ve been encouraging and helping local co-ops invest and grow that ag business. And so we’re pretty pleased with how that year came off.”
Since the onset of the pandemic, Banda said more than 160 local co-ops provided essential goods to their communities, and in several cases even a lifeline to residents in communities:
- Many co-ops quickly offered alternative shopping hours for higher-risk or more vulnerable individuals like seniors.
- Some co-ops, such as Ucluelet and Tofino Co-ops on Vancouver Island, partnered with local distilleries to produce and distribute hand sanitizer for essential workers in the early stages of the pandemic.
- Some co-ops provided a percentage of sales to support local food banks.
- Dauphin Co-op in Manitoba set up a weekly delivery of bread and buns for a local food program.
- Early on in the pandemic, many smaller co-ops like Beeland Co-op in Tisdale, Sask., established contactless shopping options like telephone or online ordering with delivery or curbside pick-up.
Co-ops also teamed up to deliver Co-op Helps, a campaign that allowed co-op customers and members to nominate people who needed a helping hand in dealing with the pandemic or those who were making a difference in their communities’ response to the pandemic.
In turn, co-ops sent more than 2,500 gift cards to nominees.
FCL invested a total of $8.1 million in community projects throughout the year.
“Just outstanding efforts in 2020 in very difficult conditions to keep servicing the communities. That’s who we are, that’s where we live and we’re going to continue to support and invest all over Western Canada,” he said.
“I’m very proud of that. And I’m thankful for how people have come together in communities all across the West to support co-ops, but more importantly to support each other in this very, very difficult time and we’ll get through it and it will be better.”