President says the $9 million is a short-term issue and is ‘definitely collectable’
A major player in the pulse, special crops and canola business is having difficulty collecting what it is owed, is considering selling all or part of its business and had three directors resign in March.
Investment analysts raised a number of concerns about Legumex Walker’s operations during a conference call on the firm’s 2014 results.
Laurentian Bank Securities analyst Nelson Mah wondered why the firm’s accounts receivable over 90 days had blossomed to $9 million as of Dec. 31, 2014, up from $3.2 million the same time a year ago.
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“That is, we hope, a short-term issue,” said company president Joel Horn.
“We hope to see that correcting itself fairly soon.”
He blamed the situation on the collapse in crude oil prices. About 70 percent of the company’s sales are in the Americas, but it still has “robust” business in overseas markets such as the Middle East, where currencies have been battered by plummeting crude prices.
Long-term customers are having trouble freeing up enough currency to make good on what is owed. Mah asked if the $9 million, which is slightly more than the company’s entire 2014 earnings, will ever be paid.
“We think it’s definitely collectable, it’s just a matter of when,” said Horn. “We had this before and we collected, so if we go on our past experience, we’re not worried.”
Horn said there has been some improvement in the receivable situation recently but nothing significant.
“I’m not going to say we’re not worried about it. We’re paying a lot of attention to it, but it will turn itself around, we believe, when crude oil turns around,” he said.
“These are friends of ours and very loyal customers.”
Mah asked if the company was still selling to those loyal customers.
“We do have to cut off some of them until they make good on what we’ve already sent them,” said Horn.
Horn was confronted with tough questions about the company’s operations, despite having what he called a year of significant financial improvement.
The company posted adjusted earnings before income, taxes, depreciation and amortization (EBITDA) of $8.8 million, up from negative adjusted EBITDA of $1.8 million in 2013.
“We are pleased with this performance given the market conditions but are confident we can achieve much higher levels of profit,” said Horn.
The company’s troubles stem from its underused Pacific Coast Canola plant in Warden, Washington. The plant has been unable to secure adequate seed supply because of poor rail service and insufficient local seed supply.
“Given the external factors that impacted Pacific Coast Canola in 2014, I’m proud of how well our team performed under such challenging, untypical circumstances,” said Horn.
Mah wanted to know why the company recently announced it was considering selling off all or a portion of the company.
“Did somebody call in with bids?” he asked.
Horn said he was unable to comment on the process but added that analysts and shareholders will be updated if there are any developments.
Mah also asked why three members of the board of directors resigned in March, including Ivan Sabourin, former president of Roy Legumex Inc., which merged with Walker Seeds to form Legumex Walker.
The three directors own 13 percent of the company’s common shares. Sabourin is staying on as a manger in the firm’s special crops division.
Horn did not comment on the reason behind the resignations.
Instead, he said three other board members have been appointed to a special committee to oversee the initiative to explore “strategic and financial alternatives.”
“With the special committee, clearly the board is undergoing a process. I can’t comment on any specific changes,” he said.
Another analyst wondered why the company recently sold one of its offices in Saskatoon. He asked if that was done to free up cash.
“That wasn’t for liquidity issues. That was to get a better working environment for our employees,” said Horn.
The employees were moved to the company’s special crops headquarters, which is also in Saskatoon.
“We wanted to get everybody on one floor in a better, more open environment,” he said.
