SASKATOON – Things couldn’t have gone much better for Saskatchewan Wheat Pool last year.
Despite a big drop in grain shipments, the pool recorded net earnings of $48.4 million in 1995-96, up by a healthy 48 percent from the previous year.
“When you have a low handling year and still have good profitability, that’s very gratifying,” said chief executive officer Don Loewen.
And he said the outlook for 1996-97 is promising. Increased production of barley and wheat should translate into increased grain handlings at the pool’s country and terminal elevators, while demand for farm inputs should be strong again next spring.
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The pool’s bottom line has rarely looked better than it did in 1995-96. Over the previous five years, profits averaged just over $27 million. Only in the boom years of the early 1980s, when earnings reached $73 million, has last year’s total been bettered.
Sales and operating revenue in the year ended July 31 were up five percent to a record $4.1 billion, while earnings from operations jumped by 87 percent to $91.5 million. The company’s earning per share was $1.64.
Loewen said the results were in line with the company’s expectations and show the pool is on the right track in its strategy of diversifying into food processing ventures while at the same time improving performance in its core grain handling and marketing operations.
Record farm supply sales of $451 million generated earnings of $66.2 million, up from $17 million last year. That includes the pool’s one-third share of profits from Western Co-operative Fertilizers Ltd., jointly owned by the three prairie pools.
While many farmers complained about high fertilizer prices last spring, Loewen said the strong earnings reflected the realities of the market, with increased acreage and strong grain prices.
“The bullishness of the market and the bullishness of farmers increased demand, and when demand goes up you pay more,” he said.
Grain handling and marketing operations produced earnings of $48.5 million on sales of $2.9 billion, down from $49.2 million.
As a result of low grain inventories at the start of the year and a reduced export program, the pool handled just 9.3 million tonnes of grain, down from 10.7 million tonnes the previous year and below the five-year average of 10.8 million tonnes.
The pool did maintain its market share at 57 percent of total Saskatchewan grain deliveries.
Among the other divisions, food processing produced net earnings of $27.6 million (down from $32 million), livestock marketing earned $2.6 million ($4 million) and publishing earned $1.4 million ($1.5 million). The company paid interest expenses of $31.7 million and corporate taxes of $40.6 million.
Restructuring not a factor
Loewen said the pool’s financial restructuring midway through the year had no significant impact on the company’s bottom line.
“We’d have had these earnings regardless,” he said, adding the pool’s equity conversion is not that big a deal.
“I think the financial restructuring has been overplayed and overworked and people have read things into there that they shouldn’t have,” he said. “All we were getting was a new tool to be able to do things better on behalf of this co-operative.”
The benefits will come down the road, he said, citing the company’s recent announcement that it will expand into the hog industry.
“That will cost hundreds of millions of dollars. We could not have announced anything like that if we had stayed under the old structure because we couldn’t access that kind of money.”
