The Canadian dollar fell sharply after the Bank of Canada declined to raise interest rates. The U.S. dollar strengthened against most currencies as other central banks also held interest rates. Oil prices fell as more Iraqi oil became available, but OPEC said it was planning production cuts. U.S. consumer confidence is rising. The S&P/TSX composite fell one percent over the week. The Dow slipped 0.5 percent, the Standard and Poor’s 500 0.3 percent and the Nasdaq composite 0.9 percent. By D’Arce McMillan
Saskatoon newsroom
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One word sums up Agricore United’s year-end net loss of $13.7 million, said Brian Hayward, company president: weather.
The delayed and prolonged seeding season, a cool summer, then more bad weather and delays at harvest steeply reduced the company’s crop input business, particularly fertilizer sales.
“It was the year summer didn’t come to the Prairies … and the fall was a mess,” he told analysts and reporters in a teleconference on the year-end results.
“We are disappointed with the results but we believe Agricore United has successfully managed the things we can control. We can’t control the weather and we have had to again deal with an adverse weather event.”
Canada’s largest grain company handled more grain in a more profitable way and its livestock operations saw similar profitability to last year, but it wasn’t enough to offset the lower sales in crop inputs.
Still, the company did better than the year before. Its year-end loss of $13.7 million as of Oct. 31 compared to a loss last year of $18.3 million before special provisions related to the sale of the company’s publishing arm.
The fourth quarter, covering August through October, was particularly bad, generating a loss from continuing operations of $24.2 million compared to a loss of $18 million in the same period the year before. The late harvest made fall fertilizer and herbicide applications almost impossible.
For the year, the weight of fertilizer sold fell 17 percent from 2003, reducing sales by $77 million.
Crop protection product sales fell by $20.3 million or almost seven percent for the year, but seed sales increased by $5.2 million or almost six percent.
Ironically, while the weather worked against the company this past year, it set up conditions that might benefit it in the current fiscal year.
Hayward said the large volume crop drew down soil nutrient levels. Also, soil moisture this fall was generally excellent, raising his hopes for strong demand for fertilizer next spring.
The good crop harvested in 2003 provided AU with lots of grain to handle.
The company shipped 10 million tonnes, a 35 percent increase over 2002-03, a drought year. Its grain handling market share slipped to 34.7 percent from 36 percent.
Grain handling gross profit improved to $213.6 million, up from $157.1 million last year. The margin per tonne increased to $21.34 from $20.87 last year.
It put 5.6 million tonnes or 56 percent of its total handlings through its port terminals, up from 50 percent the year before.
Hayward said 2005 grain handling results will largely be determined by how much grain farmers decide to market.
Farmers harvested a much higher percentage of feed quality grain this year. That volume, plus the record American corn crop, have depressed feed grain prices and some farmers might sit on some of their grain, hoping for better prices in the 2005-06 crop year.
“On the feed wheat side, the world market can take a lot of it. It is really a question of whether farmers are inclined to deliver at the current low price level, or whether they will hold on to some inventory and look for price appreciation into the last half of 2005,” Hayward said.
The Canadian Wheat Board has said it expects to export one to two million tonnes of feed wheat this crop year, but Hayward said the total could be more.
“We are working with the wheat board, as other companies are, to try to segregate grain with intrinsic qualities even though it might appear to be feed. We will do everything we can for our customers to ensure that we maximize the value out of this messy harvest,” Hayward said.
The livestock part of the business saw feed sales by weight increase 8.5 percent, but at lower prices than the year before. Gross profit for feed sales was $40.1 million for the year, up from $37.5 million.
Gross profit from hog sales climbed to $425,000 from $380,000 last year. Other livestock revenue climbed by $531,000 to $3.4 million, thanks to improved results from AU’s equity stake in Puratone Corp.
Other highlights:
- The company lowered its debt to $443.2 million from $510 million the year before.
- AU spent $32.5 million on capital expenditures, including buying Vertech Feeds in Red Deer, replacing its feed mill in Edmonton, buying the remaining 50 percent of shares in Prairie Mountain Agri Ltd., an elevator at Roblin, Man., spending $9.2 million on grain storage expansion projects and $1.2 million for port terminal sampling systems.
- As of Dec. 6, AU has approved 19,500 customers for $615 million in credit for the 2005 growing season, compared to 18,900 customers for $587 million last year.
- AU’s board of directors declared a quarterly dividend of three cents per share on the limited voting common shares to be paid Feb. 15 to shareholders of record at the close of business on Jan. 15, 2005.
