Agropur sales rise, patronage dividends slip

Farmer members of Quebec dairy co-op giant Agropur can expect a lower patronage payout for fiscal 2012, despite a five per cent jump in gross sales.

The dairy producers’ co-operative, which marks its 75th anniversary in 2013, on Wednesday booked $3.655 billion in gross sales for its fiscal year ending Nov. 3, up 5.1 per cent (and including an extra week) compared to fiscal 2011. The co-op and its joint ventures processed 3.234 billion litres of milk during 2012, up from 3.055 billion a year earlier.

The co-op’s earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $246.8 million for 2012, up from $244.9 million in 2011 — but net earnings for the year slipped to $39.3 million from $54.3 million in 2011.

Furthermore, Agropur’s patronage dividends payable to farmers for the 2012 fiscal year will total $101.6 million — corresponding to a rate of 7.35 per cent on the value of members’ milk deliveries, and down 8.1 per cent from $110.6 million in 2011.

Looking at the overall picture, the 3,288-farmer co-op "is in a more solid position than ever, and our operating results achieved a remarkable level again this year. This means that we have the resources that we require to pursue our growth," CEO Robert Coallier said in a release.

The drop in net earnings was driven in part by a $7.3 million loss in the co-op’s net from joint ventures, down from a $10 million profit the previous year. Such joint-venture losses in 2012 included a $9.1 million write-down plus a $1.5 million increase in Agropur’s share of operating losses on its investment in Argentina’s La Lacteo.

Agropur CFO Jocelyn Lauziere said in the co-op’s annual report it decided to put its interest in La Lacteo up for sale based on "economic uncertainty in that country and the investments that would be necessary for the development of that joint venture."

Instead, Agropur plans to "continue our international development in markets that will better match our long-term objectives," he wrote.

"Large sums necessary"

Agropur, in its Ultima Foods joint venture with Edmonton’s Agrifoods International, also incurred "substantial expenses" in launching Iogo, Ultima’s new yogurt and dairy goods brand, Lauziere noted.

While Iogo’s launch across Canada in August has been deemed a "great success" with higher-than-forecast sales volumes, Lauziere added that "the large sums necessary for the launch of Iogo negatively affected the earnings of this joint venture and thus of our share."

Iogo staked out a 12 per cent market share in Canada just two months after its launch, the co-op said, and due in part to Ultima’s aggressive marketing, the Iogo brand has a recognition level over 82 per cent in Quebec and 63 per cent elsewhere in Canada.

"Thanks to the positioning of the brand and significant investments, Ultima Foods was able to establish widespread distribution (for Iogo) in record time," Agropur said Wednesday.

Ultima had moved to create and launch the new brand in 2012, having expected its license to manufacture and market Yoplait products in Canada to expire in September that year. However, Ultima in May reached a deal with the Canadian arm of the Yoplait brands’ majority owner, Minneapolis-based General Mills.

Under the new co-packing agreement, Ultima will continue to make Yoplait products for Canada for General Mills to market, for at least the next six years.

Agropur’s other product launches in 2012 included the Baboo brand, which "opened up a brand new category of dairy products intended for toddlers aged 12 to 24 months."

Related stories:
Agropur, Farmers Dairy to merge, Feb. 11, 2013
Dairy co-ops to keep making Yoplait for Canada, May 8, 2012

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