Another quarter, another multimillion-dollar loss.
Saskatchewan Wheat Pool last week reported a net loss of $30.4 million for the three-month period ending April 30 on sales and operating revenue of $310 million.
That marks the 15th consecutive quarter in which the grain handling company has posted negative numbers in its financial report.
The last time the pool was able to talk about a profit was in the fourth quarter of the 1998-99 fiscal year, when it reported modest earnings of $1.3 million.
Since then it has been nothing but bad news for the firm, which has grappled with high debt levels and low grain volumes and undergone a complete financial restructuring.
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Quarterly losses have averaged $19.8 million, ranging from a low of $6.7 million in the first quarter of 2000-01 to $41.1 million in the fourth quarter of 2001-02.
But as they announced the third quarter loss for 2002-03, pool officials held out hope they might be able to report a profit in the next fiscal year, assuming normal crop output and good grain shipments.
“We now have the financial capacity and operating flexibility to restore profitability as production levels normalize,” said chief executive officer Mayo Schmidt.
Company officials declined to offer specific projections of financial results in the coming year other than to say there is potential for a “significant earnings recovery” in 2003-04.
They also said it will probably be the 2004-05 fiscal year before the company is able to achieve its full earnings potential, as farmers are expected to hold back some 10 percent of their deliverable grain supplies in 2003-04 in order to rebuild on-farm inventories after consecutive droughts.
Schmidt said that in a normal year the pool will be able to handle eight to nine million tonnes of grain and sell around $400 million worth of farm inputs.
That would result in earnings before interest, taxes, depreciation and amortization, or EBITDA, of $115-$130 million and cash flow of $70-$85 million.
“We look forward to testing our industry-leading grain handling system in a normal year,” he said during a conference call with market analysts and reporters.
While the company is optimistic about the future, it continues to bleed red ink now.
Drought and the resulting drop in grain handlings continued to affect quarterly results.
The company handled just 800,000 tonnes of grain at its primary elevators in the quarter for a year-to-date total of 3.6 million tonnes, down 36 percent from the previous year. Shipments through the pool’s export terminals so far this year are 1.6 million tonnes, about half of the previous year’s 3.1 million tonnes.
As a result, EBITDA from the crucial grain and marketing division was a loss of $5.3 million
The pool’s market share now sits at around 23.5 percent across Western Canada, up from around 20 percent two years ago, and Schmidt said the company expects to see a modest increase in that as crop volumes return to normal.
One bright spot during the quarter came with increased sales of farm input products such as fertilizer, seed, herbicides and insecticides. Those totalled just under $44 million compared with $34 million in the same quarter last year.
The pool’s agri-food processing sector generated sales of $31 million and EBITDA of $5.7 million. Earnings in the processing sector were hurt by limited supplies of malting barley and lower volumes and returns in the pork business.
Total sales and operating revenue of $310 million was down sharply from $550 million in the same quarter last year, due to the 45 percent decline in 2002 grain production and the absence of revenue this year from companies the pool sold.
The pool’s total debt as of April 30 was $360 million, made up of $273 million in long-term debt and $123 million in short-term debt. Another $255 million in convertible subordinated notes that will likely be converted to equity in 2008 under terms of the pool’s financial restructuring, is recorded as equity on the company’s balance sheet.
