Ceres Global Ag Corp. announces results for the year and fiscal quarter ended
June 30, 2010
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES OF AMERICA/
TORONTO, Aug. 12 /CNW/ - Ceres Global Ag Corp. ("Ceres" or the "Corporation") is announcing its results for the first quarter ended June 30, 2010.
The highlight of the quarter was the closing of the acquisition of Whitebox Commodity Holding Corp. (operating as Riverland Ag), on June 11, 2010. The acquisition transformed Ceres from a passive investor in marketable securities to an operating company.
Largely due to the use of funds required to complete the acquisition, the Company's net portfolio investment position, valued at fair value, was $34.8 million as at June 30, 2010 compared to $90.7 million as at March 31, 2010. In addition, as at June 30, 2010, the Corporation's cash position was $21.9 million, excluding cash at Riverland Ag (March 31, 2010: $28.9 million). Moving forward, Ceres will continue to transition the remaining public equity investments toward cash to support the growth of Riverland Ag and for potential investments in other operating businesses.
The financial results for the quarter ended June 30, 2010, as discussed in the following paragraphs, include both portfolio investment results for the quarter and 19 days of operating results of Riverland Ag.
Riverland Ag
During the 19-day period, Riverland Ag recorded revenues, gross profit, earnings before interest, taxes, depreciation and amortization ("EBITDA") and operating earnings ("EBIT") of $17.5 million, $1.2 million, $1.03 million and $0.9 million respectively. This level of profitability is consistent with the pre-acquisition profitability of Riverland Ag, and was achieved with a broad exposure to cereal grains.
Investment Revenues and Gross Profit
Investment revenues for the quarter ended June 30, 2010 (dividend, interest and other investment revenues) totalled $293,686 (June 30, 2009: $755,578). Together with the Riverland Ag's gross profit of $1,213,968, total gross profit and investment revenue was $1,507,654 (June 30, 2009: $755,578).
Expenses
Operating expenses for the quarter ended June 30, 2010 totalled $1,583,295 (June 30, 2009: $1,024,887). Of this amount, operating expenses of $460,041 are attributable to Riverland Ag (June 30, 2009: $nil).
Investment Losses
For the quarter ended June 30, 2010, aggregate realized and unrealized investment losses were $16,085,023 (June 30, 2009: realized and unrealized investment gains totalled$10,862,051). Poor equity returns were generally experienced in the market during this quarter. In addition, following the announcement in March 2010 of the pending acquisition of Riverland Ag, Ceres began to increase the cash component of the portfolio in anticipation of payments due on closing.
Gain on Purchase of Riverland Ag
Riverland Ag was purchased for a price 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 $20.4 million USD ($21.3 million CAD) has been 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 equity purchase price of $67.8 million USD.
Net Income for the Quarter and Earnings per Share
Consolidated net income for the quarter ended June 30, 2010 was $4,820,199 (June 30, 2009: $10,592,742). Basic and fully diluted earnings per share for the quarter ended June 30, 2010 were $0.37 (June 30, 2009: $0.82).
Investment Portfolio, Ceres
The following is a summary of the investment portfolio and cash held by Ceres as at June 30, 2010 and March 31, 2010:
Fair values Fair values
as at as at
June 30, 2010 March 31, 2010
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Portfolio investments owned (long) $ 58,190,790 $ 118,691,712
Liability for investments sold short (23,394,022) (27,444,805)
Unearned premiums on written options (36,477) (537,694)
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Net portfolio investments, at fair values $ 34,760,291 $ 90,709,213
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Cash (excluding cash at Riverland Ag) $ 21,885,522 $ 28,884,374
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The decrease in the fair value of the net portfolio investments during the quarter ended June 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$50.7 million) and the difficult equity market conditions experienced in this quarter.
"We are pleased with the completion of the acquisition of Riverland Ag during the quarter and are encouraged by its early operating results", stated Gary Selke, Chairman and CEO of Ceres. Mr. Selke continued, "Riverland Ag represents an exciting first acquisition and Ceres is well positioned to support its continued growth in agriculture infrastructure."
Ceres is also pleased to announce that Riverland Ag is moving forward on a 2.5 million bushel expansion at its Shakopee, Minnesota facility at an expected capital cost of $5.3 million USD. The expansion is expected to be completed by October 31, 2010 and will support both storage contract and owned inventory strategies.
As at June 30, 2010, the net asset value attributable to each outstanding Common Share and related Warrant was $9.67, compared to the values as at the following dates:
March 31, 2010: $10.03
December 31, 2009: $ 9.71
September 30, 2009: $ 9.02
June 30, 2009: $ 8.26
The net asset value as at June 30, 2010 represents a decrease of 3.59% during the quarter, as the accounting gain on the purchase of subsidiaries and the earnings contributed by the operations of Riverland Ag were exceeded by poorer returns in public agriculture securities.
The unaudited interim consolidated financial statements and management discussion and analysis for the three months ended June 30, 2010 are available under the Corporation'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 Corporation 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 Corporation'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 Corporation. 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 Corporation'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 Statement of Income and Deficit
For the three-month period ended June 30, 2010
(with comparative figures for the three-month period ended June 30, 2009)
(Unaudited)
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Quarter ended Quarter ended
June 30, 2010 June 30, 2009
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REVENUES
Grain trading sales, net of discounts
and allowances $ 17,537,585 $ -
Storage and rental income 394,293 -
Cost of grain trading sales (16,717,910) -
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Gross profit 1,213,968 -
Dividend, interest and other revenues 293,686 755,578
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Total gross profit and investment
revenues 1,507,654 755,578
OPERATING EXPENSES 1,583,295 1,024,887
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LOSS FROM OPERATIONS (75,641) (269,309)
Realized loss on sale of investments (5,339,378) (2,572,472)
Realized (loss) gain on currency
hedging transactions (708,912) 4,303,116
Realized and unrealized gain (loss)
on foreign exchange 985,451 (1,050,048)
Change in unrealized (loss) gain
on investments (11,022,184) 10,181,455
Gain on purchase of subsidiaries 21,303,150 -
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INCOME BEFORE PROVISION FOR INCOME TAXES 5,142,486 10,592,742
PROVISION FOR INCOME TAXES, CURRENT 322,287 -
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NET INCOME FOR THE PERIOD 4,820,199 10,592,742
Deficit, beginning of period (16,822,966) (48,574,590)
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DEFICIT, END OF PERIOD $ (12,002,767) $ (37,981,848)
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EARNINGS PER SHARE
Basic $ 0.37 $ 0.82
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Fully diluted $ 0.37 $ 0.82
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CERES GLOBAL AG CORP.
Summary Interim Consolidated Balance Sheets
As at June 30, 2010 and March 31, 2010
(Unaudited)
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June 30, 2010 March 31, 2010
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ASSETS
Current
Cash $ 25,292,369 $ 28,884,374
Portfolio investments owned,
at fair value 58,190,790 118,691,712
Unrealized gains on derivative contracts,
at fair value 3,156,022 1,006,364
Accounts receivable, trade 18,143,522 -
Dividends, interest and other
receivables, and due from brokers 8,642,177 8,584,765
Inventories 80,251,691 -
Income taxes recoverable 93,422 75,641
Prepaid expenses 1,737,073 29,194
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195,507,066 157,272,050
Investment in company subject to
significant influence 2,091,705 -
Property, plant and equipment 50,757,490 -
Other long-term assets 1,155,503 -
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TOTAL ASSETS $ 249,511,764 $ 157,272,050
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LIABILITIES
Current
Bank indebtedness $ 33,410,240 $ -
Accounts payable and accrued
liabilities, management fees
payable, due to broker and
due to Manager 7,151,895 4,371,414
Repurchase obligations 11,477,122 -
Liability for investments sold short,
at fair value 23,394,022 27,444,805
Unearned premium on written options,
at fair value 36,477 537,694
Unrealized loss on forward foreign
exchange contracts, at fair value 1,109,177 41,151
Income taxes payable 478,036 -
Current portion of long-term debt 2,620,000 -
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79,676,969 32,395,064
Long-term debt 21,396,667 -
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TOTAL LIABILITIES 101,073,636 32,395,064
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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 1,138,277 -
Deficit (12,002,767) (16,822,966)
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TOTAL SHAREHOLDERS' EQUITY 148,438,128 124,876,986
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 249,511,764 $ 157,272,050
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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 12 grain storage and handling facilities in Minnesota, North Dakota, New York and Ontario, Canada with a total storage capacity of 44 million bushels. 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 Corporation's business and operations. The Corporation cautions that, by their nature, forward-looking statements involve risks and uncertainty and the Corporation's future actual results could vary materially from those expressed or implied in such statements. Reference should be made to the Corporation'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: Jason Gould, Chief Financial Officer, at (416) 915-2426
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