LETTER TO SHAREHOLDERS THREE-MONTH PERIOD AND YEAR ENDED MARCH 31, 2012
The following is our report to our fellow shareholders on Ceres’ results and activities for the three-month period and year ended March 31, 2012.
Highlights for the year and the fourth quarter ended March 31, 2012 were as follows:
- Consolidated – year ended March 31, 2012: $5.9 million ($0.40 per share), quarter ended March 31, 2012: $1.2 million ($0.08 per share);
- Riverland Ag – year ended March 31, 2012: $13.4 million ($0.90 per share), quarter ended March 31, 2012: $0.3 million ($0.02 per share). The decrease in Riverland Ag’s EBITDA for the current quarter (Q4 2012), compared to the quarter ended December 31, 2011 (Q3 2012), is caused by continued reduced carrying income, reduced basis income and lower trading gains.
- Net income (loss):
- Consolidated – year ended March 31, 2012: loss of ($3.8 million) (($0.25) per share), quarter ended March 31, 2012: loss of ($0.4 million) (($0.02) per share);
- Riverland Ag – year ended March 31, 2012: $3.8 million ($0.25 per share), quarter ended March 31, 2012: loss of ($1.4 million) (($0.09) per share).
- Consolidated net loss includes the effect of Ceres’ corporate-level share of General and administrative expenses as follows: year ended March 31, 2012: $5.7 million ($0.38 per share), quarter ended March 31, 2012: $1.2 million ($0.08 per share), and Finance income (loss) as follows: year ended March 31, 2012: loss of ($1.8 million) (($0.12) per share), quarter ended March 31, 2012: income of $2.2 million ($0.15 per share).
- Cash and Portfolio Investments:
- As at March 31, 2012: total of $39.6 million, being $2.72 per share as at that date (December 31, 2011, total of $45.2 million ($3.08 per share)). The decrease in cash and portfolio investments reflects the effects of the continued repurchase of shares through the normal course issuer bid and of investments in property, plant and equipment.
- Shareholders’ equity per common share:
- As at March 31, 2012, consolidated shareholders’ equity per common share is $10.69 (December 31, 2011: $10.83; September 30, 2011: $11.07; June 30, 2011: $10.58). The decrease during this quarter is primarily attributable to the strength of the Canadian dollar over the quarter and the related effect on the un-hedged portion of Ceres’ investment in the net assets of Riverland Ag, denominated in U.S. dollars. In addition, lower operating results at Riverland Ag contributed to the decrease in net book value per share.
- Normal Course Issuer Bid:
- On October 13, 2011, Ceres announced a normal course issuer bid commencing on October 17, 2011 with the intention of purchasing up to 1,184,334 shares. For the quarter ended March 31, 2012, Ceres purchased 109,800 shares for a total cost of approximately $635,000. The average purchase price during this quarter, under the normal course issuer bid, was $5.78 (quarter ended December 31, 2011: 279,724 shares were purchased for $1.5 million; average purchase price was $5.37).
The challenges of lower facility utilization and reduced carrying charges continued in the fourth quarter. These challenges, experienced in recent quarters, are expected to continue until the 2012 North American harvest begins, at which time both Riverland Ag and the market overall can replenish.
As mentioned previously, the Canadian Government passed legislation ending the Canadian Wheat Board’s (“CWB”) marketing monopoly on wheat and barley, to become effective in August 2012. With current legal challenges to the removal of the CWB monopoly not expected to affect the outcome, Riverland Ag and the North American grain industry are positioning themselves to operate in this new environment. The Minneapolis Grain Exchange has announced its removal of the U.S. origin condition for wheat delivered against its Hard Red Spring Wheat contract, effective with the September 2012 contract. With approximately 30% of the delivery space on this contract, Riverland Ag is positioning itself for increased grain flow. We remain focused on investing in infrastructure assets at critical points in the agricultural value chain, such as strategically-located grain elevators, key logistics links and selected further processing operations, to capitalize on opportunities arising in the North American industry.
We feel that despite the challenges in earnings over the past few quarters, the asset value of the Corporation remains strong and is positioned well for the future, especially with regards to structural changes in the North American cereal grain markets.
Looking ahead to the new fiscal year ending March 31, 2013, the signs are encouraging that we will emerge from this low point in earnings, as the 2012 harvest is appearing at this early stage to be stronger and allowing for carrying charge revenues in oats and spring wheat. In addition, the changes to the CWB will open up substantial new markets for Riverland Ag to acquire new grain inventory. Furthermore, our investment in Stewart Southern Railway is gathering momentum, as its oil by rail shipments continue to expand. Ceres will look to deploy its cash resources in support of growth in these two investments. Finally, Management believes Ceres’ stock price is significantly undervalued relative to the underlying value of its assets. Therefore, Ceres will continue to deploy cash in the buyback of the Corporation’s shares while this discount exists.
Gary Selke, Chief Executive Officer
Michael Detlefsen, President
Jason Gould, Chief Financial Officer
June 11, 2012