QUÉBEC CITY, Feb. 27, 2014 /CNW Telbec/ - Holding its 92nd annual general meeting in Quebec City, La Coop fédérée once again demonstrated the strength of its invaluable contribution to the transformation of an economy in constant turmoil, and this thanks to a strong cooperative model. Furthermore, considering the highly competitive economic environment, at both the national and international levels, and the particular challenges that the agricultural industry is facing, La Coop fédérée will have, once again, demonstrated the vigour of its business model while at the same time maintaining its leading position in Quebec and top rank in the agricultural sector in Quebec and across Canada.
In this context, La Coop fédérée is pleased to announce for its financial year ending October 26, 2013, record sales of $5.2 billion, an increase of 5% compared to the previous year, with earnings before dividends for the organization's members and taxes of $23.7 million, compared to earnings before dividends and taxes of $82.3 million for the financial year ended October 27, 2012.
Despite the unprecedented level of sales, the lower results are explained principally by the performance of the Olymel s.e.c. subsidiary which posted an operational loss this past year, while the results for the Supply operations were higher than in the previous financial year.
| Highlights (Financial years ended October 26, 2013 & October 27, 2012) |
|||
| ($ millions) | 2013 | 2012 | Variation |
| Earnings before dividends & taxes | 23.7 | 82.3 | (71 %) |
| Products (total sales revenue) | 5,186.0 | 4,947.4 | 5 % |
| Dividends | 0.00 | 32.2 | (100 %) |
| Assets | 1,615.8 | 1,517.1 | 7 % |
| Equity, preferred shares & convertible debentures | 594.1 | 590.4 | 0.6 % |
"In a context of considerable cost volatility for our raw materials, created in particular by the increased globalization and financialization of the agriculture and agri-food industries, we have taken, beyond the figures achieved in the most recent financial year, concrete measures to perpetuate and solidify our cooperative business model. These will allow us to be well positioned to face our international competitors which have a different vision of the future while having access to enormous financial resources," said Claude Lafleur, CEO of La Coop fédérée.
SECTOR OVERVIEW
Gains in the Supply operations
The activities related to grain marketing, crop production and energy witnessed substantial gains in 2013. The Supply operations, which groups together mainly the Elite, La Coop and Sonic brands, increased its sales by $171 million while watching total revenue surpass $2.8 billion, representing a 6.5% jump from the previous year.
Sales in the Grains Sector benefited from higher volumes, in particular for corn, wheat and soya, while the Crop Production Sector took advantage of an increase in demand, notably from western Canada. Sales in the Animal Production Sector also increased due to price inflation for inputs which offset a slight decline in volume. Lastly, sales in the Sonic Energy Sector were down slightly while sales in the Hardware & Agricultural Machinery Sector remained relatively stable.
The sector gross margins on inputs declined, however, notably due to extremely unfavourable market conditions in the Grains Sector, the closure of the agri-food laboratory and the formation of Énergies Sonic Rive-Nord.
Considering all of these factors, the improvement in net results comes principally from registering a profit on the disposal of investments combined with gains made on the sale of chicken quotas.
Lower results for Olymel s.e.c
Under conditions of significant market volatility, sales for the financial year at Olymel s.e.c. totaled $2.408 billion, compared with $2.340 billion last year, representing an increase of $68 million. This increase is explained principally by higher slaughter volumes at Sunnymel and by an increase in sale prices for the Bacon Sector.
However, lower volumes and margins in the fresh pork meat sector, the integration of the OlySky pork production subsidiary as well as an increase in costs of production for poultry explain, in large part, the net results for the group.
More specifically, the Eastern Fresh Pork Sector saw its results decline due to, amongst others, a lower margin on meat than that obtained in 2012 and the closure of the Russian market for a large part of the financial year due to the prohibition on medication used for the production of pork meat in Canada.
As with the Eastern Fresh Pork Sector, the Western Fresh Pork Sector was also the victim of a decline in margins for meat. This sector remains, however, very interesting given that it will maintain itself at a higher level compared to the east due to an excellent mix of products, better overall markets and a lower cost of supplies.
With regard to processed pork, the results were much higher principally due to a new, long-term contract signed in September 2011 with a major Quebec food chain which has allowed for the stabilization of sale prices in addition to more advantageous transfer pricing.
For the Bacon Sector, it registered a spectacular turn-around in 2013. Generally, the continuation of the mechanization process started in 2009, customer diversification and a new business model following the reorganization of facilities after the fire in Princeville, all contributed towards this outcome.
The Poultry Sector demonstrated some signs of imbalance with lower results even though production volumes continued to increase in the face of higher inventories and a much higher cost for grains.
Lastly, it should be highlighted that the 2013 financial year was marked by the strategic acquisition of the third largest pork producer in Canada, Big Sky Farms Inc., which represents more than 20% of supply for the processing plant in Red Deer, AB.
Financial stability and business acquisitions
The organization's equity, made up of preferred shares and convertible debentures, was $594.1 million on October 26, 2013, an amount relatively unchanged compared to the previous financial year.
Fluctuations in cash flow related to operational activities after net variations in non-cash working capital increased to $114 million, 12% more than the $102 million recorded for the previous year. Considering the $31 million fluctuation in cash flow generated by financing activities, which allowed for continuity in the strategic positioning of La Coop fédérée after having made $74 million in business acquisitions in 2013. This amount includes an investment by OlySky, an Olymel subsidiary, which allowed for the acquisition of assets and the takeover of operations and the acquisition of Big Sky Farms. These assets are comprised of facilities principally located in Saskatchewan, the herd, genetic nucleus, the farrowing and finishing sites as well as feed mills and transportation activities.
Elsewhere, a little after the end of the financial year, La Coop fédérée announced the purchase of a minority position in Groupe BMR through its Unimat division following a commercial understanding between the two groups initiated in January 2013.
As a result of this collaboration, this new partnership has at its disposition 360 points of sale in Quebec, Ontario and in the Maritimes, and can count on much greater purchasing power. They are also better equipped to face the growing competition in this promising niche market. In February 2014, La Coop fédérée announced that it would gradually close its hardware and materials distribution centre in Trois-Rivières which operates under the Unimat banner.
"In the face of the challenges posed by this highly competitive environment and ferocious international competition, La Coop fédérée will continue to judiciously allocate its capital in a proactive manner towards projects with high return potential that will allow it to reconcile the financial interests of its members and partners as part of its characteristic philosophy," said CEO Claude Lafleur.
To conclude, Lafleur also mentioned the project to build a nitrogen fertilizer plant in the Bécancour industrial park in partnership with Indian Farmers Fertiliser Co-Operative (IFFCO) as an example where La Coop fédérée and two other financial partners intend to invest $1.2 billion and creating numerous specialized jobs. This investment will stimulate the regional economy by replacing purchases that the cooperative now makes with suppliers in the Middle East and Russia. It should be recalled that the MDDEFP published the report of the BAPE commission of inquiry in January 2014, which concluded that the project responded to the needs of producers and the region, and that it was acceptable with regards to the environmental and socio-economic aspects of sustainable development.
A model of solidarity and shared benefits
Founded on the values of solidarity, fairness, honesty and responsibility, La Coop fédérée is inspired by the model that places human values above those of materiality and recognizes, within the limits of sound management practices, the primacy of people over capital.
La Coop (including Olymel) spent a total of $1.2 million on donations and sponsorships to assist worthy organizations and events during the fiscal year. Consistent with these values, La Coop fédérée and its network quickly set up the Fonds de soutien à la communauté de Lac-Mégantic following the fire that ravaged the downtown area of the municipality. Thanks to the solidarity of its members, employees and customers, a total of $60,000 was collected, including $20,000 that was initially donated by La Coop fédérée.
"Our 2013 results and our future projects illustrate, without a doubt, the capacity of La Coop fédérée to face a difficult juncture all the while continuing to position itself to respond to important issues such as the sustainability of the agricultural profession or the pressing needs of young farmers, to name just a few. The limited size of the Quebec market obliges us to have a different vision, one of our own making, and to be very proactive. This forces us to work differently in responding to the interests of our members for well-being as they expect a fair balance between short-term profitability and long-term sustainability. We intend to pursue this direction while respecting the environment as well as all the values that are held closely by our unique cooperative model," said Denis Richard, president of La Coop fédérée and chairman of the board for Olymel.
About La Coop fédérée
Founded in 1922, La Coop fédérée is the largest agri-food enterprise in Québec. It is owned by over 100,000 members grouped into 97 cooperatives located in several Canadian provinces which are present throughout the entire agri-food chain. As well as being a wholesaler, La Coop fédérée also provides agricultural producers with all the goods and services they require for their farming operations. The network has five brands: Elite and La Coop (animal and crop production, grain marketing), Unimat (hardware and farm machinery), Sonic (energy) and Olymel (meat processing). La Coop fédérée employs nearly 10,000 people with sales reaching $5.2 billion. Including its affiliated cooperatives, La Coop fédérée employs almost 16,000 people with combined sales of $8.3 billion. For more information, visit www.lacoop.coop and www.twitter.com/LaCoop_federee.
SOURCE: La Coop fédérée
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