Good news and bad news balanced out in Saskatchewan Wheat Pool’s first quarter financial results.
Earnings are down in the company’s vital food processing sector by 33 percent, due to poor canola crushing margins experienced by CanAmera Foods, in which the pool has a one-third stake.
But the company moved more grain through its country and terminal elevators than during the same period last year, boosting earnings from grain handling and marketing operations by 20 percent.
Overall, the pool reported pre-tax earnings of $16.6 million for the three months ending Oct. 31, five percent ahead of the same period last year.
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However, a higher tax bill dropped net earnings for the quarter down slightly to $9 million. That translates into earnings of 30 cents per share, down from 32 cents a year ago.
Following the release of the first quarter results, RBC Dominion Securities maintained its one year target price for the pool’s Class B common shares at $21. Pool shares have been trading around $19 each.
But it reduced its forecast for the pool’s 1996-97 earnings per share to $1.83 from the previous level of $2.10, blaming “ongoing weakness” in the canola crushing and processing sector.
An earnings per share of $1.83 translates into a net earning of about $54 million for 1996-97, up from $48.4 million.
RBC analyst Irene Nattel said in a commentary published Dec. 18 the future continues to look bright for the pool.
“The stock continues to trade at a significant discount to comparable publicly traded companies, and we are reiterating our ‘buy’ recommendation.”
Sask Pool projects its earnings to be “comparable” to last year but says it can’t be more specific.
Chief financial officer Lyle Spencer said in an interview the company has to be cautious in its outlook because a lot of unexpected things can happen.
“It’s not until it’s all done that you really know where you’re at,” he said. “But we don’t see anything right now that we should be unduly alarmed about. It looks like a good year.”
He said the company is pleased by the increase in pre-tax earnings, which is seen as the best indicator of corporate performance. And the drop in earnings per share to 30 cents from 32 cents a year earlier is no great concern.
“What we’re really interested in is what happens to the share price over the longer term,” he said. “If you watched that day by day or hour by hour, it’s going to drive you crazy. We’re in this business for the very long term.”
More first quarter results
- Total sales and revenue was $1.1 billion, up 33 percent from the first quarter last year.
- Grain volumes were up 12 percent at country elevators and 29 percent at terminals. Operating income per tonne of grain handled was seven percent higher at $6.32 per tonne.
- Farm supply sales were up up 21 percent but operating earnings declined by 12 percent to $6.9 million.
- Cash flow per share was 74 cents, up from 71 cents a year earlier.
