Saskatchewan Wheat Pool (SWP), Canada’s largest publicly traded agri-business cooperative, has blamed severe drought last summer and prolonged dryness through the spring period this year for dramatic drops in its Q3 2002 results.
Go deeper with GlobalData
EBITDA for the Q3 was C$2.7m (US$1.74m) compared to C$26.2m in the previous year. Year-to-date EBITDA was C$37.4m compared to C$80.1m a year earlier. Drought conditions throughout western Canada have persisted since the summer of 2001, particularly in Saskatchewan, resulting in an EBITDA decline of approximately C$30m. In addition, there was a year-over-year net reduction of about C$13m in EBITDA from businesses that have been sold as part of SWP’s divestiture programme. These results overshadowed success in reducing costs and continued strong results generated by Can-Oat Milling and Prairie Malt Limited.
CEO Mayo Schmidt, said: “Despite the weather, SWP remained committed to managing those areas within our control. We have already reduced costs in our core operations by C$25m this year and have more than surpassed all of our original restructuring estimates. In fact, in just 24 months we have reduced our cost base by over C$50m. Those dollars, which directly impact the bottom line, would become much more apparent under normal growing conditions. We’ve also worked aggressively to reduce the leverage of this organisation and our results today clearly illustrate that success. Balance sheet debt at 30 April 2002 declined by C$168.5m or over 20% compared to 30 April 2001.”
The Q3 operating loss, prior to interest, securitization and taxes (EBIT) and one-time items was C$14.7m compared to earnings of C$6.8m a year earlier. On a year-to-date basis, EBIT was a loss of C$16.6m compared to earnings of C$22.7m last year.
The consolidated net loss for the quarter was C$12.7m or C$0.34 per share compared to an C$9.9m loss or C$0.26 per share in the third quarter of fiscal 2001. On a year-to-date basis, the net loss was C$51.1m (C$1.36 per share) compared to a C$34m loss (C$0.91 per share) for the same period last year. The fiscal 2002 net loss includes C$3.9m in one-time after-tax provisions from the sale of non-core assets.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataSWP’s primary shipments for the first nine months were 7.4% below last year’s level. In contrast, industry shipments were down sharply, declining 21% in the first nine months of fiscal 2002. However, EBITDA from Grain Handling and Marketing was 35% lower on a year-to-date basis. In addition to an 18% decline in volumes during the Q3, last summer’s drought caused significant declines in the production of high margin commodities like canola and special crops. As a result, year-to-date volumes reflect a higher proportion of lower margin products.
In the Agri-products segment, sales and EBITDA were impacted by unusually cold weather throughout western Canada in April, which kept producers off the land and delayed seeding by over four weeks. In addition, prolonged drought carried over from last year and poor topsoil moisture levels throughout most of Saskatchewan have caused producers to delay their agri-products purchases until growing conditions improve.
In the Agri-food segment, sales reductions largely reflect the divestiture of agri-food processing assets that are no longer contributing to segment results. Can-Oat Milling continued with record results generating substantial EBITDA growth in the quarter and first nine months of the year. Prairie Malt also strengthened results for the period. CanAmera’s contribution, prior to the 31 May divestiture, improved slightly in the quarter but remained sharply lower than the previous year reflecting dramatic reductions in Canadian canola supplies and higher seed prices.
Looking forward, SWP expects exports to decline significantly this year because of low production levels from last year’s drought impacting wholly owned port terminal volumes. In the primary business, SWP has been able to maximise volumes in the first nine months but expects significant reductions in the Q4 as stocks deplete. The lack of higher valued commodities in the system and increased pressure as competition for remaining stocks accelerates, is expected to reduce EBITDA from grain handling and marketing to less than half of last year’s level by 31 July.
For Agri-products, expectations for this year have been adjusted to reflect the late spring and switch to crops that require fewer crop inputs. Rain through the southern part of the Prairies over the last week will be positive for crop development. However, central and northern Saskatchewan precipitation levels are below average and the Agri-products segment is not expected to reach the sales or EBITDA levels of the previous year.
“Shareholders should take comfort that this year’s performance is not a reflection on our core businesses, which are operating very efficiently,” insisted Schmidt: “We continue to have strong support from our lenders, recognising the fact that the remainder of the year will be challenging due to non-controllable weather events.
“We are confident that we will withstand current industry conditions. Whatever temporary setbacks Mother Nature holds in store, we continue to take the necessary steps to protect the long-term interests of our investors, customers and employees, to provide the foundation for a solid recovery.”
