The celebration of black ink on the ledger was short lived at Saskatchewan Wheat Pool, which posted a net loss of $15.6 million in its first quarter.
The pool was in a celebratory mood earlier this fall when it released year-end results that showed an annual profit for the first time since 1998.
However, the company faces a more difficult environment this year as it contends with a low quality harvest, said pool chief executive officer Mayo Schmidt.
The quarterly loss was 59 percent larger than the $9.8 million loss posted last year at the same time
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“We are not surprised, given the quality of the crop, by the outcome of the quarter,” he said during a teleconference call with reporters and financial analysts.
Grain companies rarely make much money in the August to October quarter, but this year the pool’s loss was compounded by increased costs incurred because of the late harvest.
“There was unusually low grain margins during the quarter because of the late harvest and also the fact that the company was in a position to pay some high purchase premiums and shipping costs to secure some of the required quality of commodities to meet sales commitments made several months earlier,” Schmidt said.
He noted the company’s grain handling business EBITDA fell to $1.5 million for the quarter, compared to $12.7 million last year.
EBITDA, which stands for earnings before interest, taxes, depreciation and amortization, is a measure of how much cash the business is generating before these charges.
While grain handling’s profitability suffered, the volume of grain collected at the pool’s primary elevators was down only one percent.
The company also noted that its Vancouver terminal was closed in August and September while it completed the modernization of its unloading system. The changes are expected to improve throughput capacity and speed by 15-20 percent.
The late harvest also prevented fall field work, which cut agri-product sales to $52 million from $59 million last year, largely as a result of reduced fertilizer sales.
The company’s processing arm, which includes malt and oat processing plants, saw improved performance. Can-Oat sales results were down slightly because of lower oat product prices, but Prairie Malt’s sales rose by 19 percent.
Like Agricore United the week before, the pool said it believes the volume of grain handled might be reduced in the near term as farmers hang on to grain in hope of higher prices in the future. Sales might be pushed to the spring or summer, which corresponds to the Pool’s third and fourth quarters.
“What is not clear to us at this time is what the Canadian Wheat Board export marketings are going to be. At one time they were giving a range of 16.5-17 million; now that has been adjusted to around 16.3 and down again to 16 million,” Schmidt said.
Over the year, he believes the company will handle more grain and improve its market share but the poor quality crop will cut margins by 10-15 percent. Also, good moisture conditions in most of the Prairies gives Schmidt hope that input sales will increase in the spring.
