Saskatchewan Wheat Pool failed to make money in the first quarter of the new crop year, but it did improve on its performance of a year ago.
The company, which has launched a $1 billion hostile takeover bid of rival grain handler Agricore United, has reported a net loss of $5.1 million (six cents per share) for the three month period ending Oct. 31, on total sales and revenue of $341.3 million.
That compares with a loss of $7.7 million, or nine cents per share in the period a year earlier, on sales of $273.9 million.
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It’s the second year in a row the pool has improved its first quarter performance.
The company also reported that its earnings in the 12 months ending Oct. 31 were $19.3 million, up from $10.9 million in the previous 12 months.
“This sets the stage for another year of solid performance,” said SWP chief executive officer Mayo Schmidt.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, a key indicator of a company’s financial health, were $2.8 million, compared with zero a year earlier.
The improvement was largely the result of good grain shipments and strong margins from grain handling and marketing operations.
An early harvest, which was 90 percent completed by mid-September, combined with a consistently high quality crop and a strong Canadian Wheat Board export program, enabled the company to get off to a fast start in terms of grain shipments and earnings.
That helped make up for reduced quarterly sales and earnings in the agriproducts division, mainly due to a 13 percent drop in fertilizer sales.
The company’s agrifood processing operations recorded increased sales during the quarter by both Can-Oat Milling and Prairie Malt.
However, EBITDA was lower at $3.1 million, due to a combination of factors including oat quality problems, excess capacity in the malting industry and unfavourable foreign exchange rates.
Schmidt said there are lots of reasons to be optimistic about the coming year, including the quality crop, increased deliveries by farmers, strong world demand, tight world supplies reflecting production problems in the United States and Australia, good soil moisture in Western Canada, lower fertilizer prices, better cash flow for farmers and expansion at Can-Oat Milling.
All those factors should be good for the pool’s balance sheet in the coming year.
“We are extremely pleased with our financial position today and we are confident in our potential for solid performance in 2007,” said Schmidt.
“Lower interest costs, reduced debt and higher cash levels have given us added flexibility and opportunity to look to the future with a sense of optimism.”
Here are some of the highlights of the first quarter:
- Grain shipments from primary elevators during the quarter totalled 2.08 million tonnes, 19 percent ahead of the same period last year.
- Grain handling margins increased slightly from a year ago to $18.75 per tonne, as improved quality resulted in increased exports and blending opportunities.
- Receipts at port terminals, including the company’s share of Prince Rupert Grain receipts, totalled 1.44 million tonnes, up by 8.2 percent from last year.
- The pool’s market share of prairie grain handling was 23 percent during the quarter, down from 23.5 percent in the same period last year.
- Interest costs were cut by more than half from a year ago to $2.8 million. The pool reduced its long-term debt by $45 million to $110 million, while the company’s total debt to equity ratio was 22:78 compared with 32:68 a year ago.
- Cash flow before working capital changes was $748,000, compared with a loss of $4.56 million in the first quarter a year ago.
