Big investments in crop production services in the last 18 months have positioned United Grain Growers to better weather the downturn in grain handlings, said its chief executive officer.
Brian Hayward said UGG earnings for the third quarter are down, but they would be worse if not for strong crop production input sales and earnings.
“Over the last few years there has been a shift going on in the organization in terms of the relative balance of businesses we are involved in,” he said.
“Even if grain handlings had been the same as last year, I think our crop input business would probably be about the same size as the grain thing.”
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UGG reported sales and revenue from services of $465.1 million in the third quarter, up from $435.1 million in the same period last year.
Net earnings were $1.13 million, down from $1.38 million last year.
In the first nine months sales were $1.29 billion compared to $1.34 billion last year.
Over nine months UGG posted a loss of $6.2 million in 1998-99 fiscal year, down from a profit of $3.6 million in the same period last year.
Grain handlings at primary UGG elevators are down 18 percent in the first nine months and down nine percent at port terminals.
“Obviously, we would much prefer a lot of volume going through the system as opposed to what is happening this year,” he said.
The grain handling business had income of $2.5 million for the third quarter compared to $5.4 million in the same time last year.
But UGG’s grain business is doing better than the industry average, which was down 20 percent in the country and 30 percent at port.
Hayward said it is due to UGG’s alliance with key customers.
“We have a number of relationships with ADM and others that we’ve found to be very helpful,” he said.
It has also successfully implemented its grain movement plans, he added.
Crop production services in the third quarter saw gross profit increase to $17.4 million from $8 million last year due to the purchase of 18 crop input retailers across the Prairies in the last 18 months.
The sector’s quarterly operating income rose to $4 million from a loss of $126,000 last year.
“The nature of the farm supply business is that you incur expense for about 40 weeks of the year and you sell for about 12,” he said. About 75 percent of sales occur from mid-April to mid-June.
Livestock services saw lower gross profit and revenue. Income fell to $1.65 million from $2.24 million.
Farm business communications’ gross profit and revenue slipped to $4.18 million from $4.42 million. Income fell to $1.15 million from $1.41 million.
Generally, earnings before interest, taxes and depreciation were $11.1 million, up nine percent from the same quarter last year.
Cash flow for the quarter was $7.1 million or 41 cents a share compared to $5.9 million or 34 cents a share last year.
