Saskatchewan Wheat Pool is off to a better start to its new fiscal year than it was a year ago.
The company last week reported a net loss of $7.7 million on sales and other operating revenue of $274 million, during the three months ending Oct. 31.
That might not sound great, but it’s better than the first quarter of 2004-05, when the pool lost $15.6 million on sales of $229 million.
Last year, the company overcame that first quarter loss to post a profit for the year of $12.1 million.
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Chief executive officer Mayo Schmidt said there are reasons to be optimistic.
A bigger crop in Saskatchewan means there will be more grain to handle. Handling margins are expected to increase due to improved quality from last year. Exports of grain and oilseeds are expected to be higher. And moisture levels should be excellent heading into next spring.
“We continue to be very positive about the future,” Schmidt told market analysts and reporters during a Dec. 13 conference call.
However, Schmidt cautioned that the large crop, combined with record carryover stocks from 2004-05, makes it unlikely the entire crop will be moved during the 2005-06 fiscal year.
“The pool expects that year-end carryover levels will surpass the record highs set at (July 31) 2005,” he said.
The pool recorded gross grain handling margins during the quarter of $18.63 per tonne, compared with $15.85 last year. Gross margins represent sales minus the cost of sales divided by tonnage.
During the first quarter last year, the pool incurred extra costs to meet sales commitments because of severe frost damage and harvest delays. This year, there were ample grain supplies due to an early harvest in the south and large carryover stocks.
Schmidt said the company has three strategic priorities for the coming year: improving efficiencies and cutting costs of internal operations; increasing earnings by developing new products and services and working with others in the industry to address system-wide efficiency and capacity issues.
Boosting the “very modest” earnings being generated in the grain industry will require all players to work toward the same goal, he said.
“We think there is an industry-wide consensus that consolidation is required and we intend to look for options to drive that process forward,” he said.
The pool is willing to explore any relationships, alliances or partnerships that will increase value and efficiency, he said.
Operational highlights of the first quarter:
- The pool shipped 1.8 million tonnes of grain, up from 1.5 million tonnes a year earlier. The increases were fueled by better demand for non-board grains, which were of higher quality than a year earlier.
- Farmer deliveries rose 19 percent to 1.9 million tonnes, representing a market share of 23.5 percent, up from 22.5 percent a year earlier.
- The pool’s terminals at Vancouver and Thunder Bay handled 1.2 million tonnes, up from 900,000 tonnes.
- Sales in the agri-products division were $54.5 million, up from $52 million, with strong sales of fertilizer, pesticides, seed and agricultural equipment.
- The agri-food processing segment saw sales slip by five percent to $29.4 million. Increased sales at Can-Oat Milling were offset by a decline at Prairie Malt.
* Corporate costs were $5.6 million, up from $4 million, mainly reflecting new corporate taxes the company pays as a result of its financial restructuring.
- Cash flow used to finance continuing operations was $4.6 million, compared with $8.1 million a year ago. The improvement reflects higher earnings from grain handling and marketing operations and Can-Oat Milling.
- The debt to equity ratio at the end of the period was 32:68, compared with 63:37 a year ago.
