Saskatchewan Wheat Pool isn’t letting its hostile takeover bid for Agricore United distract it from the main goal of any business – making money.
The company last week announced net earnings of $7.9 million, or nine cents a share, for the three months ending Jan. 31, compared with $2.9 million, or four cents a share, for the same period a year ago.
Halfway through the 2006-07 fiscal year, the Pool has recorded net earnings of $2.8 million, compared with a loss of $4.7 million in the first half of 2005-06.
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Chief executive officer Mayo Schmidt said the corporate outlook for the remainder of the year is promising, with expectations of strong demand and prices for farm inputs, strong exports, steady grain movement and heavy deliveries by farmers because of good commodity prices.
The Pool said it doesn’t expect the disruption to rail services caused by weather problems and the strike that crippled Canadian National Railway for two weeks to affect the company’s bottom line this year.
Fran Malecha, vice-president for grain operations, said the company has fallen two to three weeks behind in grain shipments but expects things to improve in the coming weeks and months.
“We’ve got five months of the year left to catch that up,” he said. “We believe the system has the capacity to do it, and certainly we have the capacity to do that with our assets.”
Market analysts said the Pool’s quarterly results exceeded expectations.
In grain handling and marketing operations, earnings before interest, tax and amortization, or EBITDA, totalled $27.6 million, more than double the $12.2 million of a year earlier. The earnings include $3.8 million received in a grain-related legal settlement, the details of which are being kept confidential.
Grain shipments out of primary elevators were slightly less than $2.2 million, about the same as last year. However, gross handling margins were up sharply to $24.25 per tonne from $17.68 a year ago.
That reflects the different mix of commodities shipped this year, with more high-margin malting barley and less low-margin feed barley.
“We believe we can sustain these margins for the rest of the year,” Malecha said.
Handlings at grain export terminals declined by 15 percent from last year with a modest increase in movement through Thunder Bay offset by a 21 percent reduction at Vancouver.
Agri-product operations recorded EBITDA of $1.3 million, compared with a slight loss the previous year. Retail sales during the quarter totaled $33.8 million.
Agri-food processing generated earnings of $4.6 million, down from the previous year’s $5.1 million. Can-Oat Milling sales increased by 24 percent from a year ago.
Together the three operating segments generated EBITDA of $33.6 million, up from $17.3 million. That was reduced by corporate expenses of $7.2 million and a $5 million provision for settlement of a pension dispute now before the courts.
Market analyst Orin Baranowsky of BMO Capital Markets described the Pool’s results as better than expected. He increased the target price for the company’s shares to $8.80 from $8.50 and the earnings per share for the year to 44 cents from 42.
Other highlights of the quarterly report:
- Total sales for the quarter were $448.2 million, up from $367.7 million.
- Cash flow from continuing operations was $24.5 million, up from $6.4 million.
- Total debt as of Jan. 31 was $182.8 million, including long-term debt of $107 million. A year earlier the numbers were $198.3 million and $153.9 million.
- The company’s debt-equity ratio was 28-72, compared with 34-66 a year ago.
