Domestic and international market-moving events have dragged hard on the year-end bottom line for Sollio Cooperative Group, particularly in its fresh pork business.
Quebec-based Sollio — which operates the ag input and farm service business Sollio Agriculture, meat packer Olymel and hardware retailer BMR — on Thursday reported full-year revenues of $8.876 billion for its fiscal year ending Oct. 29, 2022, up from $7.926 billion in the previous year.
With no patronage dividends paid out in 2022 — or 2021 — Sollio said it booked a loss before taxes, but including losses from discontinued operations, of $337.5 million for 2022, compared to a loss of $21.5 million in 2021.
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The co-operative group said the “deterioration” in that level of loss compared to 2021 was “mainly attributable to the Sollio Food division” — that is, Olymel.
Heading out of fiscal 2021, “we knew that (2022) was going to present a lot of challenges, and we took the necessary steps to return the company to profitability,” Sollio group CEO Pascal Houle said Thursday in a release.
“We took the actions we did with a view to limiting as much as possible the impact on marketing tools and services to member producers, which are at the heart of our mission. Of course, we fully intend to continue along these lines in the coming year.”
Olymel
The Olymel division booked a loss, before income taxes, of $445.7 million for 2022, compared to a $71.8 million loss in 2021. The loss, Sollio said, stemmed mainly from the division’s fresh pork sector and a “significant writedown of goodwill.”
(The Sollio group’s overall loss for the year included $248 million in “impairment of intangible assets and goodwill.”)
The food division’s loss came despite sales of $4.6 billion in 2022, up by $373.9 million on the year, due in part to the “resumption of restaurant activities nationwide.”
The start of fiscal 2022 was “particularly difficult” for the fresh pork slaughter and cutting business in Eastern Canada, due to the number of hogs awaiting slaughter against a shortage of available labour, which “forced the division to resort to external slaughtering.”
Olymel’s plants in the East thus “experienced difficulties in producing fully deboned prime cuts and the division did not earn the margins expected from this added-value operation” and also saw a “significant rise in labour and supply costs.”
Olymel’s fresh pork business in Western Canada, based around its hog slaughter plant at Red Deer, Alta., also booked lower results on the year, “significantly impacted by higher grain, labour and transportation costs, as well as the closure of the Chinese market in the first three quarters of the fiscal year for a second consecutive year.”
Meanwhile, Sollio said, Olymel’s processed pork and poultry sectors booked “outstanding results, driven primarily by higher prices and the mix of products sold.”
Looking ahead, Olymel said the temporary federal program allowing agri-food processors to raise the threshold for temporary workers in their plants will help the business meet its labour needs — and its plants have also been cleared to resume pork exports to China, which it described as “a unique global market for consumption of pork byproducts.”
Sollio said Olymel will also be “reducing the number of hogs slaughtered and reallocating the workforce, as well as increasing the production of value-added products, in particular through the conversion of the Princeville plant.”
Agriculture
The co-operative group’s Sollio Agriculture division, which includes the co-operative’s seed and input retail, agronomic service, livestock, feed milling and grain marketing businesses, booked earnings before income taxes of $19.6 million in 2022, up from a loss of $24.8 million in 2021. Sales for the division came in at $2.929 billion, up from $2.357 billion in 2021.
That division’s increase in earnings, Sollio said, came mainly from record-level net sales in the crop production sector, which “was able to deal with volatile market prices while benefitting from a favourable positioning for available inventories.”
The division’s grains marketing sector saw reduced revenue and related costs as it “continued to implement its repositioning plan over the past year, with an orderly exit from several business segments.”
Fertilizer prices have taken a significant jump since the second quarter of fiscal 2022 following Russia’s invasion of Ukraine, due in part to the Canadian government’s 35 per cent tariff on imports from Russia which “proved very expensive for our partners and network members,” Sollio said.
BMR
Sollio’s hardware retail division, Groupe BMR, also booked an increase in net sales for 2022 at $1.574 billion, up from $1.53 billion in 2021. BMR’s earnings before taxes, however, reached a record-level $53.8 million, up by $25.6 million from 2021.
BMR’s results stemmed from “extraordinary economic conditions coupled with several operational challenges.” The division cited higher sales resulting from commodity price increases during the first half of the year, along with inflation and the addition of new vendors. — Glacier FarmMedia Network
