There’s bad news and then there’s not-so-bad news.
It was the case of the latter for shareholders of United Grain Growers Ltd. when the company released its financial results for the first quarter of the 1997-98 fiscal year.
The firm reported a loss of $1.8 million or 12 cents per share for the first quarter. That won’t put money in shareholders’ pockets, but it’s a substantial improvement from a year earlier, when the first quarter produced a loss of $2.5 million, or 27 cents per share.
Chief executive officer Brian Hayward said the results, which included a 16 percent increase in operating income, are good news for shareholders.
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“UGG’s strategy has been to focus on its core business of providing commercial services to farmers and the strategy is paying off,” he said.
Total sales revenue for the period was down slightly, while operating income was up 16 percent to $4.9 million. However deductions for interest, tax and depreciation expenses resulted in the net loss of $1.8 million.
UGG made more money handling grain in the three-month period, moving 20 percent more through its country elevator system.
Grain volumes at export terminals at Vancouver and Thunder Bay were unchanged at 936,000 tonnes. That stands in contrast to results at Saskatchewan Wheat Pool, which last week reported a 36 percent increase in terminal volumes.
Hayward said he has no explanation for the difference.
“The numbers we tracked would not suggest that we’ve had any kind of collapse in our market share. Our terminals are doing very well.”
UGG’s operating income totaled $518,000, compared with a loss of $307,000 a year earlier. Grain handling made $6.7 million, crop production services lost $4.5 million, livestock services made $1.7 million and farm business communications made $92,000, while corporate and other expenses totaled $3.4 million.
Cash flow from operations was up slightly to $1.6 million, with cash flow working out to eight cents per share, down from 12 cents.
Hayward said shareholders should keep in mind the seasonal nature of the grain industry, noting that UGG is even more subject to seasonal effects than Sask Pool because it has less investment in value-added processing.
“It’s not unusual whatsoever for us to have losses for three quarters,” he said, and then make it up in the last quarter of the year.
Last year, for example, the first quarter loss of $2.5 million turned into a year-end profit of $9.1 million.
