Agricore United’s bottom line looked a lot better at the end of 2002-03 than it did a year earlier.
And something unrelated to the company’s main business of handling grain or selling farm inputs can take a lot of the credit.
The company last week reported a net loss of $2.4 million, or 15 cents a share, for the 12 months that ended Oct. 31, 2003.
That compares with a loss of $17.5 million, or 42 cents a share, the previous year.
A 24 percent increase in sales of crop protection products was a big factor in the improvement, along with a $28.4 million reduction in expenses.
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But the company’s earnings statement also benefited to the tune of nearly $12 million from the sale of the company’s publishing division, Farm Business Communications.
Without the revenue from that sale, AU would have recorded a net loss of more than $14 million, not much less than the year before.
The sale of FBC to Glacier Ventures International Corp. of Vancouver, which was announced in August and completed on Oct. 9, resulted in an after-tax gain of $11.9 million.
Chief executive officer Brian Hayward said last week that two years after the creation of AU through the merger of Agricore Co-operative and United Grain Growers – two years marked by drought and sharply reduced grain shipments – the company is in remarkably good shape.
“AU had built a solid foundation on which to increase profitability,” he told market analysts and reporters during a Dec. 11 conference call.
The company has reduced its debt by 50 percent, introduced permanent annual cost reductions totalling $120 million, rationalized its grain elevator system, built good relationships with farmers and customers and grabbed a 36 percent share of the prairie grain market, Hayward said.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, seen by analysts as a good measure of a company’s financial health, were $100.5 million for the year, a 33 percent increase from the previous year’s $74.7 million.
Hayward said that with this year’s good crop, the company has “turned a corner” in grain handling.
AU handled 61 percent more grain in the first quarter of 2003-04 than it did in the same period last year, while the industry as a whole recorded an increase of 22 percent.
However, he declined to comment on whether AU would record a profit in 2003-04, saying as a publicly traded company, it can’t issue earnings forecasts.
The year-end statement released by the company last week indicates that the grain handling and merchandising business produced gross profit and revenue of $155 million for the year, down 26 percent from $208.7 million the year before.
Both grain handling volumes and profit margins were down in 2002-03.
Shipments through country elevators were down by 1.4 million tonnes to 7.4 million tonnes, while the company’s port terminals handled 3.7 million tonnes, down from 4.9 million.
The average margin was $20.91 per tonne, down by 12 percent from the previous year’s $23.72, due to a number of factors including reduced margins on tendered Canadian Wheat Board grain, competitive pressures to maintain volumes in a drought situation and increased ocean freight costs.
As a result of all that, EBITDA in the grain handling division was $18.6 million, a sharp drop from the previous year’s $63.6 million.
By contrast, the company’s crop production services division registered a big increase in EBITDA, which climbed to $97.6 million from $38.9 million. The average margin on sales was 25 percent.
