93rd Annual General Meeting - Diversification and acquisitions - A winning strategy for La Coop fédérée

MONTRÉAL, Feb. 26, 2015 /CNW Telbec/ - Meeting in Montréal for their 93^rd annual general meeting, the members of La Coop fédérée have once again demonstrated the strength of their business model, which has allowed them to benefit from diversification while pursuing growth through acquisitions in the context of highly competitive international markets.

Considering the challenges imposed by an environment in constant evolution, along with the more specific ones facing the modern agriculture and agri-food industry, La Coop fédérée will have, once again, demonstrated its ability to maintain their leadership position in Québec and in the Canadian agriculture sector.

La Coop fédérée is announcing for its fiscal year ending October 25, 2014 record sales of $5.4 billion, an increase of 4% over previous year's sales. Earnings before dividends and taxes attributable to members were $77.3 million, compared to the earnings before dividends and taxes of $23.7 million for the fiscal year ending on October 26, 2013.

The increase in returns can largely be explained by improved performance from the Olymel L.P. affiliate, whereas Supply activities, now grouped under the Agri-business and Retail & Innovation Divisions, were lower than the returns of the previous year.

"In the context of significant fluctuations and sometimes unpredictable costs for our inputs and the prices of several of our finished products, we have, beyond the financial results, continued to optimize our operations by continuing to solidify our foundations in order to better face our competition on a national and international scale," said Denis Richard, president of La Coop fédérée. 

SECTOR REVIEW

Better performance for Olymel L.P.

Olymel recorded a profit before special items in 2014, a significant turnaround from a loss in the previous year.

The net sales for the fiscal year totalled $2.797 billion, compared with $2.408 billion last year, an increase of $389 million. This improvement can be explained primarily by an increase in sale prices for the Fresh Pork sector. Specifically, the Eastern Fresh Pork sector saw its loss increase slightly due to the closure of the Russian market from the middle of the summer onward, in retaliation against Canada regarding the conflict with the Ukraine.

Like the Eastern Fresh Pork sector, the Western Fresh Pork sector also posted some negative returns, slightly larger than those of last year. An increase in volume along with the increase in hog weights had a favourable effect on returns, but the positive contribution of these factors was offset by a reduction in the margins on meat.

At the processed pork level, returns decreased largely due to the reduction of margins on meat. An increase in the cost of raw materials in relation to the sharp increase in price for live animals explains this reduction.

The bacon sector recorded a strong increase as part of the continued and spectacular turnaround that started in 2013.The continuation of the mechanization plan undertaken in 2009, the investment in slicers at the precooked level, along with adjustments to sale prices and the pruning of customer numbers have contributed to these improvements. 

The Poultry sector recorded rising returns. The increase in the margins on meat due to a lower price for live animals, as well as an increase in production volumes contributed to achieving these results.

The Western Pork Production sector witnessed a significant turnaround situation in achieving good profits compared to a loss recorded last year. This turnaround is in large part due to a significant increase in the sale price of live animals as well as a marked decline in the price of grains. 

Finally, it should be highlighted the management of operations at Sogeporc and the Eastern Pork Production services were transferred from La Coop fédérée to Olymel L.P. at the beginning of the 2014 fiscal year.

A lower contribution from the Agri-business Division

The Agri-business Division at La Coop fédérée benefits from the synergy between three essential sectors: livestock production, crop production and grains. It also benefits from a partnership with the leader in animal nutrition research, Co-operative Research Farms (CRF).

The Agri-business Division saw its sales decrease by $178 million for the fiscal year, seeing its revenue pass from $1.8 billion to $1.6 billion. This decrease can be explained primarily by the fall in the price of commodities in the Grains sector combined with a reduction in volume of fertilizer sales. Generally, the increase in sales seen in the Livestock Production sector did not succeed in compensating for the lower sales in the Crop Production and Grain sectors.

Specifically, the Livestock Production sector recorded in sales due to an increase in the sales of chicks and the deployment of three monogastric feed mills in the Chrysalide model.  This transformation allowed for the deployment of ruminant feed mills in the previous year.  The remaining monogastric feed mills will be deployed in the coming year.  The inauguration of the Saint-Romuald Distribution Centre in December 2013 finalized the implementation of the storage and distribution functions.

In the context of lower milk production in Québec, the improvement of dairy herd productivity combined with another higher than average quality forage harvest, led to a slight drop in feed sales for ruminants. Despite this industry reality, our market share has been on the rise. It should be noted that the amount of feed sales for poultry are increasing whereas sales in pork feed are declining.

As for the returns by the Crop Production sector, they were marked by a drop in price as well as by weaker demand for fertilizers following a particularly cold and rainy spring, in both Québec and Ontario. In addition, there was a prioritization of available amounts of fertilizer for agricultural clients at the expense of a part of the volume targeted for industrial clients.

The revenues and market share are constantly increasing for crop protection products.

For sales in the Grains sector, they suffered the vagaries of the fall in the average selling price caused by the abundance of the American harvest. Also, the volumes handled by Grains Elite s.e.c were negatively affected by the late soybean harvest last fall, similar to the wheat and soybean sales of our Ontario affiliate, Grower Direct Exports. Nonetheless, the contribution of the Grains sector posted a significant improvement compared over last year.

It should be noted that despite  a significant drop in the price of grains, AgriEst - centre agricole Coop, succeeded in maintaining its profitability at a comparable level to last year despite a decline in revenues.

Generally, gross margins in the sector for inputs increased slightly due particularly to better risk management in the Grains sector, supplier discount programs that improved support for crop protection, as well as a favourable buying strategy for fertilizers.

Finally, the overall increase in expenses can be explained by the increase in the depreciation of capital costs for plant offsets in the Animal Feed Services.

Retail & Innovation Division

In addition to operating the Agri-business Division, La Coop fédérée is also present in the retail market through its Sonic Energy and Hardware & Farm Machinery sectors.

Through its Sonic, Unimat and BMR banners, these two sectors allow La Coop network to serve not only farmers and the regions, but also all consumers, regardless of membership of not.  

The sales of the Retail & Innovation Division remained stable compared with last year, with a decline in earnings before taxes.

The activities of the Hardware & Farm Machinery sector are undergoing profound changes since
La Coop fédérée became a minority shareholder in Groupe BMR, a position it has held since January 2013. For information, it exercised its option rights in the agreement to buy the remaining shares, with the announcement being made on February 5, 2015.

Significant efforts were made during the year to integrate the activities of the Trois-Rivières Distribution Centre with those of BMR, a process completed last January with great success. Nonetheless, the closing and transition costs combined with a difficult market made for a lower contribution from this sector than in the previous year.

The contribution of the Farm Machinery service showed a positive increase in sales, in particular for forestry equipment.

The revenue of the Sonic Energy sector grew due to the average increase in prices for petroleum products, an increase in volumes due to the cold 2013-14 winter, a strong corn drying season in the fall and through an acquisition in the Montréal region. The Groupe pétrolier Norcan inc. and Propane Québec Inc. supply companies also contributed in a marked fashion this year as part of solid progress in this sector.

Soundness, financial flexibility and cash flow

The consolidated balance sheet of the organization posted, on October 25, 2014, total assets of more than $1.7 billion, compared with the $1.6 billion at the end of the previous fiscal year. The increase in total assets was primarily attributable to the acquisition in November 2013 of a minority stake in Groupe BMR through the Unimat banner, and another acquisition in December 2013 of a poultry business with a guaranteed supply volume.

The equity of the organization, including social capital and the reserve before non-controlling interests, climbed to $680.6 million as of October 25, 2014, compared with $591.8 million as of
October 26, 2013.

Working capital reached $274 million compared with $206.6 million at the end of the previous fiscal year, with respective ratios of 1.5 to 1:3. With respect to the debt ratio of the organization, it sits at 33:67 at the end of 2014, against 39:71 at the end of the previous fiscal period.

As of October 2014, La Coop fédérée had at its disposal significant financial flexibility in terms of agreements with Canadian financial institutions. These consist of an overall credit facility of
$ 625 million, of which a $150 million segment is available under certain conditions. At the end of the 2014 fiscal year, an amount totalling $211.7 million was debited, compared to 2013 when it totalled $109.6 million.

Cash flow related to operating activities after net changes in non-cash working capital items and the increase in deferred credit decreased to $28.1 million for the fiscal year ending October 25, 2014, compared with $113.8 million for the fiscal year ending October 26, 2013.  

Considering the cash flow of $149.1 million generated by financing activities, this will allow for the continued strategic positioning of La Coop fédérée, which completed the acquisition of a minority stake in Groupe BMR in 2013. Gaétan Desroches, Chief Executive Officer of La Coop fédérée, commented on the arrival of BMR, stating: "We are very happy in our investment which was always considered for the long term horizon. Despite a general slowing of home renovation activities throughout the past few years, the achievement of anticipated synergies with Unimat activities is moving along well. In the short term, we intend to optimize certain logistical elements and ultimately demonstrate value in having brought together the two Unimat and BMR brands. However, facing the challenges posed by fierce competition at both the Canadian and international levels, La Coop fédérée will continue to allocate its capital judiciously in high-yield projects allowing for the reconciliation of the financial interests of its members and partners with its own vision."

A model of solidarity and shared benefits

Again this year, the organization and its affiliates provided bursaries, donations and sponsorships for not-for-profit and youth organizations to the tune of more than $1.5 million.  

"We need to consolidate and cooperate for the next generations. La Coop fédérée cares about the long term viability of our farms and our cooperative organizations. The future needs to be built through a global business model. A coherent business model based on values that are recognized and shared around the world.  A business model based on cooperation. Our achievements in 2014 and our future projects illustrate without a shadow of a doubt, the ability of La Coop fédérée to adapt to difficult situations while continuing to better position itself in order to adequately address the important issues of its members and partners. We therefore intend to continue to respect the unique values of our cooperative model that are so dear to us," concluded Denis Richard, president of La Coop fédérée.

Founded on deep-seated values, La Coop fédérée is an inspiration through its model which places human values above material ones and which recognizes, within the limits of sound management practices, the priority of the person over capital.

About La Coop fédérée

Founded in 1922, La Coop fédérée is the largest agri-food organization in Québec. It is owned by more than 100,000 members grouped into 98 cooperatives located in several Canadian provinces and is present in the majority of links of the agri-food chain. As a retailer, La Coop fédérée provides farmers with the necessary goods and services for operating their enterprises. Its activities are separated into three Divisions: Agri-business (livestock and crop production, and grain marketing under the Elite and La Coop banners), Retail & Innovation (energy, hardware and farm machinery, under the Sonic, Unimat and BMR banners) and Meat (under the Olymel, Flamingo and Lafleur banners). La Coop fédérée employs 10,000 people and its sales total $5.4 billion. Including its affiliated cooperatives, La Coop fédérée counts more than 16,000 employees with combined sales of $9.1 billion.
http://lacoop.coop/en/  twitter.com/LaCoop_federee.

SOURCE La Coop fédérée

Image with caption: "Denis Richard, president of La Coop fédérée (CNW Group/La Coop fédérée)". Image available at: http://photos.newswire.ca/images/download/20150226_C5668_PHOTO_EN_12611.jpg

Related Links

http://lacoop.coop/fr/