CERES GLOBAL AG CORP. ANNOUNCES RESULTS FOR THE FISCAL QUARTER AND SIX-MONTH
PERIOD ENDED SEPTEMBER 30, 2010
TORONTO, Nov. 4 /CNW/ - Ceres Global Ag Corp. ("Ceres" or the "Company") is announcing its results for the three-month and six-month periods ended September 30, 2010.
This was the first full quarter of operations of Riverland Ag Corp., which Ceres acquired during the first quarter on June 11, 2010. Riverland Ag is an agricultural grain supply ingredient company that owns and operates fourteen storage and handling facilities in the states of Minnesota, North Dakota, Wyoming, New York and the province of Ontario. The acquisition of Riverland Ag transformed Ceres from a passive investor in marketable securities to an operating company. During the quarter, Riverland Ag completed the purchase of a grain elevator and seed plant in Wyoming, and neared the completion of an expansion of its Shakopee, Minnesota facility.
During the second quarter, the Company continued to transition its remaining public equity investments toward cash to support the growth of Riverland Ag and for potential investments in other operating businesses. As at September 30, 2010, the Company had cash (excluding cash at Riverland Ag) of $48.4 million and a net portfolio investment position (valued at fair value) of $11.9 million, compared to $21.9 million and $34.8 million respectively as at June 30, 2010. Moving forward, Ceres will continue to transition the remaining public equity investments toward cash.
The financial results for the quarter and six-month period ended September 30, 2010, as discussed in the following paragraphs, include both portfolio investment results and operating results for Riverland Ag from June 12, 2010 to September 30, 2010.
Riverland Ag
During the quarter ended September 30, 2010, Riverland Ag recorded revenues, gross profit, earnings before interest, taxes, depreciation and amortization ("EBITDA") and operating earnings ("EBIT") of $96.1 million, $6.5 million, $5.5 million and $5.0 million respectively. For the 111-day period since the acquisition on June 11, 2010, revenues, gross profit, EBITDA and EBIT were $114.1 million, $7.7 million, $6.5 million and $5.9 million respectively.
During the quarter, Riverland Ag continued its growth with the acquisition of a grain elevator and seed plant facility in the State of Wyoming. The effective date of the acquisition was September 30, 2010. The facilities include a 2.3 million bushel grain elevator and storage facility located in Ralston, Wyoming and a 120,000-bushel seed cleaning, sorting and storage facility, located in Powell, Wyoming. The acquisition of these facilities in a high quality cereal grain growing area will support our third party storage and pipeline management business with a particular emphasis on malt barley.
Also during the quarter, construction neared completion on the $5.3 million USD expansion of the Shakopee, Minnesota facility.
Moving forward, Riverland Ag will continue to pursue both the acquisition of facilities as well as the expansion of existing facilities.
Investment Revenues and Gross Profit
For the six-month period ended September 30, 2010, investment revenues (dividend, interest and other investment revenues) totalled $386,020 (September 30, 2009: $1,581,374). For the quarter ended September 30, 2010, investment revenues totalled $92,334 (September 30, 2009: $825,797). Together with the Riverland Ag's gross profit, total gross profit and investment revenue for the six-month period ended September 30, 2010 was $8,093,323 (six-month period ended September 30, 2009: $1,581,374), of which $6,585,669 was earned during the quarter ended September 30, 2010 (quarter ended September 30, 2009: $825,797).
Expenses
For the six-month period ended September 30, 2010, operating expenses totalled $6,448,616 (six-month period ended September 30, 2009: $2,125,753), as follows:
| Riverland Ag | Ceres | Consolidated | Ceres | |||||||||
| From June 12, 2010 | 6 months | 6 months | 6 months | |||||||||
| to | ended | ended | ended | |||||||||
| Sept. 30, 2010 | Sept. 30, 2010 | Sept. 30, 2010 | Sept. 30, 2009 | |||||||||
| Total operating expenses, 6 months | $ | 3,009,292 | $ | 3,439,324 | $ | 6,448,616 | $ | 2,125,753 | ||||
For the quarter ended September 30, 2010, operating expenses totalled $4,865,321 (quarter ended September 30, 2009: $1,100,866), as follows:
| Riverland Ag | Ceres | Consolidated | Ceres | |||||||||
| 3 months | 3 months | 3 months | 3 months | |||||||||
| ended | ended | ended | ended | |||||||||
| Sept. 30, 2010 | Sept. 30, 2010 | Sept. 30, 2010 | Sept. 30, 2009 | |||||||||
| Total operating expenses, Q2 | $ | 2,549,251 | $ | 2,316,070 | $ | 4,865,321 | $ | 1,100,866 | ||||
For the quarter ended September 30, 2010, Ceres' operating expenses include portfolio transaction costs totalling approximately $1.1 million recognized in the accounts related to the acquisition of Riverland Ag during the prior quarter.
Investment Gains and Losses
For the six-month period ended September 30, 2010, aggregate realized and unrealized investment losses were $4,257,638 (six-month period ended September 30, 2009: realized and unrealized investment gains totalled $20,511,672). For the quarter ended September 30, 2010, aggregate realized and unrealized investment gains were $11,827,385 (quarter ended September 30, 2009: realized and unrealized investment gains totalled $9,649,619). Agricultural equities performed strongly in the second quarter versus the first quarter and Ceres benefited from this second quarter environment as investments were sold to raise cash. Ceres will continue to liquidate the portfolio in order to build cash reserves for future investment opportunities in Riverland Ag or other operating companies.
Gain on Purchase of Riverland Ag
Riverland Ag was acquired for a cost below the fair value of its net identifiable assets. Under CICA Handbook Section 1582 (Business Combinations), Ceres is required to recognize "negative goodwill" arising on the acquisition as other income, subject to the assets of Riverland Ag meeting a fair value test. On a preliminary basis, a gain on the transaction of $20.3 million USD ($21.2 million CAD) was recorded, being the difference between the value of shareholders' equity of Riverland Ag as at the date of the acquisition of $88.2 million USD and the cost of acquisition (as adjusted) of $67.9 million USD.
Net Income for the Quarter and Earnings per Share
Consolidated net income for the six-month period ended September 30, 2010 was $17,236,669 (six-month period ended September 30, 2009: $19,967,293). Basic and fully diluted earnings per share for the six-month period ended September 30, 2010 was $1.21 (six-month period ended September 30, 2009: $1.55).
Consolidated net income for the quarter ended September 30, 2010 was $12,416,470 (quarter ended September 30, 2009: $9,374,550). Basic and fully diluted earnings per share for the quarter ended September 30, 2010 was $0.81 (quarter ended September 30, 2009: $0.73).
Investment Portfolio, Ceres
The following is a summary of the investment portfolio and cash held by Ceres as at September 30, 2010 and March 31, 2010:
| |
|
|
Fair values as at Sept. 30, 2010 |
|
|
Fair values as at March 31, 2010 |
| Portfolio investments owned (long) | $ | 25,213,736 | $ | 118,691,712 | ||
| Liability for investments sold short | (13,298,346) | (27,444,805) | ||||
| Unearned premiums on written options | (23,374) | (537,694) | ||||
| Net portfolio investments, at fair values | $ | 11,892,016 | $ | 90,709,213 | ||
| Cash, Ceres | $ | 48,428,379 | $ | 28,884,374 |
The decrease in the fair value of the net portfolio investments during the six-month ended September 30, 2010 reflects the liquidation of a portion of the portfolio to fund the cash portion of the consideration paid on the acquisition of Riverland Ag (approximately US$50.8 million after closing adjustments) as well as to support future investments.
"We are pleased with the first full quarter of operations of Riverland Ag", stated Gary Selke, Chairman and CEO of Ceres. Mr. Selke continued, "We are also excited about the growth aspects of Riverland Ag as demonstrated by our ability to grow the storage capacity of the business by over 10% in the first 111 days of ownership, and we will look to deploy our cash in future growth opportunities".
As at September 30, 2010, the net asset value attributable to each outstanding Common Share and related Warrant was $10.36, compared to the values as at the following dates:
| September 30, 2010: June 30, 2010: March 31, 2010: December 31, 2009: September 30, 2009: June 30, 2009: |
$ $ $ $ $ $ |
10.36 9.67 10.03 9.71 9.02 8.26 |
The net asset value as at September 30, 2010 represents an increase of 7.14% during the quarter, reflecting the realized and unrealized gains on the portfolio investments and the profit contribution made by Riverland Ag for the quarter.
The unaudited interim consolidated financial statements and management discussion and analysis for the six months ended September 30, 2010 are available under the Company's profile on www.sedar.com . Unless noted otherwise, all amounts are in Canadian dollars.
CAUTIONARY STATEMENT AS TO NON-GAAP FINANCIAL MEASURES
In its MD&A and this press release, the Company has provided certain non-GAAP measures as supplementary information that Management believes would be useful to investors to explain its results from operations. These non-GAAP measures include EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) and EBIT (Earnings before Interest and Taxes).
EBITDA and EBIT are financial measures used by many investors to compare companies based on operating results, asset value and the ability to incur and service debt. These measures are used as the Company's net income alone, or that of the Riverland Ag operating segment, does not necessarily reflect the cash-generating potential of Riverland Ag or of Ceres on a consolidated basis. Management believes these measures are useful in evaluating performance and in making a decision as to whether to invest in the Company. However, EBITDA and EBIT are not recognized earnings measures under GAAP and do not have a standardized meaning as prescribed by GAAP. These measures are not intended to represent cash flows or results of operations in accordance with GAAP. Therefore, these measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and EBIT should not be construed as an alternative to net income or loss determined in accordance with GAAP as an indicator of the Company's or a segment's performance or cash flows from operating, investing or financing activities and financing activities of liquidity and cash flows.
| CERES GLOBAL AG CORP. | |||||||||||||
| Summary Interim Consolidated Statements of Income and Retained | |||||||||||||
| Earnings (Deficit) | |||||||||||||
| For the three-month period and six-month period ended September 30, 2010 | |||||||||||||
| (with comparative figures for the three-month period and six-month period ended September 30, 2009) | |||||||||||||
| (Unaudited) | |||||||||||||
| 3 months | 6 months | 3 months | 6 months | ||||||||||
| Sept. 30, 2010 | Sept. 30, 2010 | Sept. 30, 2009 | Sept. 30, 2009 | ||||||||||
| REVENUES | |||||||||||||
| Grain trading sales, net of discounts and allowances | $ | 93,163,295 | $ | 110,700,880 | $ | - | $ | - | |||||
| Storage and rental income | 2,957,452 | 3,351,745 | - | - | |||||||||
| Cost of grain trading sales | (89,627,412) | (106,345,322) | - | - | |||||||||
| Gross profit | 6,493,335 | 7,707,303 | - | - | |||||||||
| Dividend, interest and other revenues | 92,334 | 386,020 | 825,797 | 1,581,374 | |||||||||
| TOTAL GROSS PROFIT AND INVESTMENT REVENUES | 6,585,669 | 8,093,323 | 825,797 | 1,581,374 | |||||||||
| OPERATING EXPENSES | 4,865,321 | 6,448,616 | 1,100,866 | 2,125,753 | |||||||||
| INCOME (LOSS) FROM OPERATIONS | 1,720,348 | 1,644,707 | (275,069) | (544,379) | |||||||||
| Realized gain (loss) on sale of investments | 1,601,937 | (3,737,441) | 2,405,530 | (391,691) | |||||||||
| Realized gain (loss) on currency hedging transactions | (626,249) | (1,335,161) | 733,729 | 5,036,845 | |||||||||
| Realized and unrealized gain (loss) on foreign exchange | (708,328) | 277,123 | (114,157) | (1,164,204) | |||||||||
| Change in unrealized appreciation of investments | 11,560,025 | 537,841 | 6,624,517 | 17,030,722 | |||||||||
| Gain (adjustment) on purchase of subsidiaries | (134,207) | 21,168,943 | - | - | |||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 13,413,526 | 18,556,012 | 9,374,550 | 19,967,293 | |||||||||
| PROVISION FOR INCOME TAXES, CURRENT | 997,056 | 1,319,343 | - | - | |||||||||
| NET INCOME FOR THE PERIOD | 12,416,470 | 17,236,669 | 9,374,550 | 19,967,293 | |||||||||
| Deficit, beginning of period | (12,002,767) | (16,822,966) | (37,981,848) | (48,574,591) | |||||||||
| RETAINED EARNINGS (DEFICIT), END OF PERIOD | $ | 413,703 | $ | 413,703 | $ | (28,607,298) | $ | (28,607,298) | |||||
| EARNINGS PER SHARE | |||||||||||||
| Basic | $ | 0.81 | $ | 1.21 | $ | 0.73 | $ | 1.55 | |||||
| Fully diluted | $ | 0.81 | $ | 1.21 | $ | 0.73 | $ | 1.55 | |||||
| CERES GLOBAL AG CORP. | ||||||
| Summary Interim Consolidated Balance Sheets | ||||||
| As at September 30, 2010 and March 31, 2010 | ||||||
| (Unaudited) | ||||||
| |
September 30, 2010 | March 31, 2010 | ||||
| ASSETS | ||||||
| Current | |
|
|
|
||
| |
Cash |
$ |
52,308,891 |
$ |
28,884,374 |
|
| Portfolio investments owned, at fair value |
25,213,736 |
118,691,712 |
||||
| Unrealized gains on derivative contracts, at fair value |
|
1,866,941 |
|
1,006,364 |
||
| Accounts receivable, trade |
|
10,526,449 |
|
- |
||
| Dividends, interest and other receivables, and due from brokers |
|
12,553,674 |
|
8,584,765 |
||
| Inventories | 126,708,525 | - | ||||
| Income taxes recoverable |
|
43,898 |
|
75,641 |
||
| Prepaid expenses |
|
1,549,438 |
|
29,194 |
||
| |
|
230,771,552 |
|
157,272,050 |
||
| Investment in company subject to significant influence |
|
2,091,700 |
|
- |
||
| Property, plant and equipment |
|
53,789,127 |
|
- |
||
| Other long-term assets |
|
1,099,323 |
|
- |
||
| TOTAL ASSETS | $ | 287,751,702 | $ | 157,272,050 | ||
| LIABILITIES |
|
|
|
|
||
| Current |
|
|
|
|
||
| Bank indebtedness | $ | 34,983,023 | $ | - | ||
| Accounts payable and accrued liabilities, management fees payable, due to broker and due to Manager |
|
11,888,706 |
|
4,371,414 |
||
| Repurchase obligations |
|
44,520,396 |
|
- |
||
| Liability for investments sold short, at fair value |
|
13,298,346 |
|
27,444,805 |
||
| Unearned premium on written options, at fair value |
|
23,374 |
|
537,694 |
||
| Unrealized loss on forward foreign exchange contracts, at fair value |
|
101,975 |
|
41,151 |
||
| Income taxes payable |
|
838,758 |
|
- |
||
| Current portion of long-term debt |
|
2,572,281 |
|
- |
||
| |
|
108,226,859 |
|
32,395,064 |
||
| Long-term debt, net of current portion | 20,363,892 | - | ||||
| TOTAL LIABILITIES | 128,590,751 | 32,395,064 | ||||
| SHAREHOLDERS' EQUITY | ||||||
| Common shares | 148,162,420 | 130,762,138 | ||||
| Warrants | 9,228,422 | 9,026,038 | ||||
| Contributed surplus | 1,911,776 | 1,911,776 | ||||
| Accumulated other comprehensive income (loss) | (555,370) | - | ||||
| Retained earnings (deficit) | 413,703 | (16,822,966) | ||||
| TOTAL SHAREHOLDERS ' EQUITY | 159,160,951 | 124,876,986 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS ' EQUITY | $ | 287,751,702 | $ | 157,272,050 | ||
Ceres Global Ag Corp. Profile
Ceres is an investment company focused on the Agriculture sector. Its main investment is in Riverland Ag Corp., which is an agricultural grain supply chain ingredient business that owns and operates 14 grain storage and handling facilities in Minnesota, North Dakota, Wyoming, New York and Ontario, Canada. Riverland Ag customers include leading food and beverage companies. In addition, a significant number of its facilities act as delivery locations for certain futures contracts on the Minneapolis and Chicago exchanges.
This news release contains forward-looking statements concerning the Company's business and operations. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainty and the Company's future actual results could vary materially from those expressed or implied in such statements. Reference should be made to the Company's unaudited interim consolidated financial statements, its interim management discussion and analysis, its most recent audited annual financial statements or the initial public offering prospectus dated December 13, 2007 for a description of the major risk factors.
For further information:
contact Jason Gould, Chief Financial Officer, at (416) 915-2426
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