Saskatchewan Wheat Pool’s operating results in the second quarter fell from last year, but a one-time revenue item raised net income to $2.95 million compared to a loss of $893,000 last year at the same time.
The unusual item was a $4.92 million payment from the Canadian Agricultural Income Stabilization program related to SWP’s hog production business that it sold in 2004.
The company saw improved grain handling operating earnings and steady grain processing earnings, but its agriproduct earnings fell.
Mayo Schmidt, pool chief executive officer, said he believes the agriproduct results were a timing issue and that sales will pick up in the remainder of the year.
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“We look to the spring and summer months when the majority of our earnings are generated in agriproducts,” he said in a conference call with financial analysts and reporters discussing the three-month results to Jan. 31.
“The high yields produced last year and the generally good sub-soil moisture conditions are good signals for fertilizer sales for the remainder of the year.”
Producers are slower than normal this year to make their final seeding decisions and, although Schmidt believes the total seeded acreage will not change, the mix between low input crops like wheat versus high input crops like canola will affect segment results in the final two quarters.
Agriproduct results were also affected by a larger bad debt allowance connected to the extended terms SWP granted customers for 2004 crop inputs due to the severe frost that fall.
“Given the larger crop (in 2005), the repayment history of our producers and the recent federal dollars flowing to the farm community, we are confident that collections will normalize by year end,” he said. “In fact, collections related to the 2005 crop year are ahead of last year at this time.”
SWP handled 18 percent more grain in the quarter and improved its margin on each tonne handled.
The mix of grain handled changed from the year before, with Canadian Wheat Board grain volume down and shipments of canola and other non-board grains rising.
SWP’s market share increased to 24 percent from 23 percent at the same point last year, due mainly to the large crop in Saskatchewan where the company has a strong presence.
The Vancouver terminals joint operating agreement with JRI International is creating efficiencies and improved customer service, causing the companies to believe it will result in a 20 percent improvement in operational capacity.
Agrifood processing results were the same as last year with improved margins at Can-Oat Milling offsetting poorer results at Prairie Malt.
Schmidt said the company’s balance sheet is improving.
“We are extremely pleased with our financial position,” he said, adding the company’s financial restructuring has given it the ability to look to the future with optimism.
The total debt-to-equity ratio has improved to 34:66, compared to 64:36 at the same time last year.
The Canada Bond Rating Service increased SWP’s credit worthiness to a B+ rating, up from B.
The company also announced last week that it plans to raise $150 million through an issue of senior unsecured notes to redeem senior subordinated notes due Nov. 29, 2008. The yield on the notes has not been finalized, but the intention is to reduce the company’s interest payments.
On the labour front, the company and the Grain Services Union are at an impasse over the jointly sponsored pension plan.
The plan trustees say the plan is not solvent and has a deficit of $43.5 million. The union has filed a grievance claiming SWP is responsible for the solvency deficit. SWP disputes this.
