Even having to report that his company just lost $90 million can’t
dampen Mayo Schmidt’s enthusiasm.
The chief executive officer of Saskatchewan Wheat Pool insists most of
the company’s problems are now a thing of the past and the future can
only get better.
“This business is in pretty good shape,” he said in an interview last
week. “It’s not evident in the historical information, but the people
that read past the headlines and look at the numbers understand.”
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Schmidt made his comments as the pool reported a net loss of $92.2
million, or $2.46 a share, on sales and operating revenue of $2.6
billion during the fiscal year that ended July 31, 2002.
That compares with the previous year’s loss of $44.1 million, or $1.18
a share, on sales and revenue of $3.3 billion.
In the final quarter of the fiscal year, the pool reported a net loss
of $41.1 million, after recording $46.2 million in one-time provisions
against earnings.
Those provisions include $24.6 million associated with the jointly
owned terminal at Manzanillo, Mexico, $19.1 million arising from
employee layoffs and elevator closures, and $2.5 million from the sale
of CanAmera Foods.
After taking those provisions out of the equation, the pool’s year-end
2001-02 bottom line showed a net loss of $42.1 million, versus $17.2
million a year ago.
With those one-time costs now behind it, Schmidt said the pool’s
earnings should start to improve. Or at least they will if crop
production ever returns to normal.
“In spite of all the odds this company has faced, it is poised in a
normal year to do extremely well,” he said.
“We can predict that with an average crop and average carry-in stocks,
this company will do very well.”
While many outsiders look at the pool and see large losses, a share
price of less than a dollar and more bad times ahead because of the
drought-reduced crop, Schmidt sees good things.
- The company has reduced its debt by $249 million, or 32 percent, in
the past 12 months. The debt to equity ratio now stands at 56-44.
That’s a long way from the target of 40-60, but still an improvement
over the 60-40 where it once stood.
- Interest costs have been slashed by $21 million and annual operating
costs reduced by about $35 million during the year. Operating costs
have been cut by more than $60 million in the past two years.
- The pool’s market share in Western Canada increased by two percentage
points in 2001-02 to 23 percent and the company outperformed industry
averages. For example, primary elevator shipments declined by 12
percent versus the industry average of 23 percent.
- The company has put in place a new financing agreement and has
secured $275 million in operating loans to fund its 2002-03 business
plan, included deferred debt repayment. More discussions with banks and
financiers are planned to deal with the company’s debt.
- Sales of farm inputs are up this year and with soil moisture being
recharged across the province, there are reasonable grounds for
optimism.
Schmidt said that based on recent cost-cutting measures, an average
crop would enable the company to realize earnings before interest,
taxes, depreciation and amortization of $100 million, compared with
last year’s $74 million.
He acknowledged that the company has more work to do, and will face
tough challenges in 2002-03 as a result of the drought.
But he added that when he took on the top job at the pool in January
2000, the company was in a much worse position, faced with burdensome
debt and declining earnings, was in violation of performance covenants
with its financiers and owned a number of underperforming assets.
“We had a long, difficult road ahead of us and we have come through
that,” he said.
“We just need conditions to stabilize in areas we can’t control.”
During the year that just ended, the pool’s sales of farm inputs
declined by 16 percent to $436 million, as poor growing conditions led
to lower purchases by farmers.
Sales by the agri-food processing segment were down 10 percent to $545
million while livestock-related sales were down by more than half to
$101 million, reflecting lower hog prices, higher feed prices and asset
sales.
In the crucial grain handling and marketing operations, sales were 11
percent lower at $1.7 billion.
The problems at the Mexican terminal are due to increased rail rates
from the coastal facility to inland destinations and rates being
offered by U.S. railroads, which are competitive with shipping by water.
Schmidt said the pool plans to continue to operate the terminal, but he
added it would consider a partnership under the right circumstances.
