Low grain handling volumes and a decline in grain sales are the main reasons the Saskatchewan Wheat Pool and United Grain Growers Ltd. say they are reporting second quarter losses.
For the quarter ended Jan. 31, 1999, the Wheat Pool recorded a net loss of $700,000, or $0.02 per share, compared to net earnings of $7.2 million or $0.24 per share one year earlier.
The net earnings were $1.8 million or $0.05 per share prior to a $2.5 million after-tax restructuring charge for CSP Foods.
From August 1998 to January 1999, which included the CSP Foods restructuring provision, the Pool reported a net loss of $4.6 million.
Cash from operations stood at $12.2 million for the second quarter of 1999, bringing the six-month total to $19.6 million, or $0.52 per share, compared to $44.8 million or $1.51 per share for 1998.
Lower grain handling volumes in both the primary elevator and terminal elevator systems continued into the second quarter of 1999, and were primarily responsible for the decline in earnings, according to a news release issued by the Wheat Pool.
Volumes at the Wheat Pool's primary elevator system for the six-month period were down 25 per cent, while volume at the port terminal system handled 35 per cent less grain.
In dollar terms, the Grain Handling and Marketing segment of the Pool reported a six-month total of $3.9 million. That number was at $34.9 million a year earlier.
Those numbers reflect the forecast for the Canadian Wheat Board's export program for wheat, durum, and barley. The forecast is at a 24-year low of 14.5 million tonnes, due to international grain market conditions, including trade distorting subsidies.
The good news for the Wheat Pool comes from the Farm Supplies segment of operations. Sales for the six months ending Jan. 31 were up two per cent, and the Pool expects strong sales during the peak period of April to June.
The Agri-Food Processing segment also performed well during the quarter, with a 70 per cent increase over last year, due largely to strong contributions by CanAmera Foods and Fletcher's Fine Foods.
UGG posted a second quarter loss of $2.2 million. Grain shipments for the first six months of the fiscal year (August to January) were down 22 per cent, due mainly to the decline in CWB grain sales.
The decline in CWB sales reduced UGG gross profit by approximately $11 million. Losses in grain business operating income (4.7 million) were lessened due to increased sales of non-board grains, effective terminal operations, sound risk management, and solid execution of open market contracts, reported in a UGG news release.
The gross profit in Crop Production Services for UGG rose by $3.5 million, or 23 per cent, in the first six months of the fiscal year.
Livestock services operating income fell by $1.3 million in that same period due to the effect of weak hog markets during this time. Farm Business Communications operating income grew slightly.
Earnings before interest, taxes, and depreciation were $4.4 million for the second quarter, down from $10.2 million this time last year. The seasonal net loss per share for the quarter was 15 cents.
UGG normally earns about 90 per cent of its annual operating income in its fourth quarter, when sales of crop input products peak.
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