Saskatchewan Wheat Pool Inc.
TSX : SWP

Saskatchewan Wheat Pool Inc.

March 10, 2005 10:57 ET

Pool's Second Quarter Results in Line With Company Expectations


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: SASKATCHEWAN WHEAT POOL

TSX SYMBOL: SWP.NV.B

MARCH 10, 2005 - 10:57 ET

Pool's Second Quarter Results in Line With Company
Expectations

REGINA, SASKATCHEWAN--(CCNMatthews - March 10, 2005) - Saskatchewan
Wheat Pool (TSX:SWP.NV.B) recorded consolidated sales and operating
revenues of $322 million in the second quarter of fiscal 2005 similar to
the sales generated in the same quarter of fiscal 2004. Strong second
quarter fertilizer sales through the Pool's retail operations coupled
with increased Agri-food Processing sales offset a 7% decline in the
value of grain sales due primarily to the impact of lower commodity
prices.

For the first six months of fiscal 2005, the Pool generated sales of
$551 million compared to $610 million for the same period a year
earlier. The variance primarily reflects lower non-Board commodity
prices overall.

Second quarter EBITDA, or earnings before interest, taxes, depreciation
and amortization, was $14.0 million, compared to $25.5 million in last
year's second quarter. EBITDA for the year's first six months was $11.9
million, compared to EBITDA of $34.5 million last year. The primary
variance between the two periods relates to lower grain margins because
of the late harvest, which resulted in having to pay high purchase
premiums and shipping costs to secure the required quality commodities
to meet its sales commitments in the first six months. This year's
EBITDA includes approximately $1.6 million in positive one-time items,
while in the first six months of last year there was approximately $7.1
million in positive one-time items.

Chief Executive Officer, Mayo Schmidt says, "Operating results for the
quarter are in line with our expectations given the poor quality crops
available to grain handlers this year. The business continues to gain
momentum and we look forward to strong sales and cash flow for our core
operations in the peak spring selling season. This, together with the
balance sheet benefits we anticipate from a successful recapitalization
initiative and our planned $150 million underwritten rights offering,
will restore the Pool to a strong financial and competitive position. It
will allow us to build on the many efficiency measures and financial
improvements we have implemented since 2000."

Interest expense was $8.7 million for the quarter, including $3.0
million of non-cash accretion. For last year's second quarter, interest
expense was $9.2 million, including $2.6 million of non-cash accretion.
Interest expense in the first six months of 2005 totaled $18.1 million
with $5.9 million of non-cash accretion, which compares to $19.4 million
in the first six months of last year including $5.1 million of non-cash
accretion.

Amortization for the quarter was $6.8 million compared to $6.0 million a
year earlier. Total amortization for the six months ended January 31,
2005 was $13.3 million up from the $12.0 million in the first six months
of last year.

EBIT, or earnings before interest and taxes, for the quarter was $7.1
million, down from $19.5 million in the same period in 2004. In the
first six months of this year, the Pool's EBIT loss was $1.4 million,
compared to 2004 EBIT earnings of $22.5 million.

For the quarter, the net loss from continuing operations was $0.9
million compared to earnings from continuing operations of $9.5 million
last year. For the six months, the net loss from continuing operations
was $16.5 million compared to net earnings from continuing operations of
$2.4 million in the first six months of 2004.

The net loss for the second quarter was $0.9 million ($0.03 per share)
compared to a net loss of $4.8 million in the second quarter last year
($0.05 per share). On a year-to-date basis, the net loss was $16.5
million ($0.11 per share) compared to $14.6 million ($0.13 per share) in
the first six months of 2004.

Cash flow from continuing operations recovered to a breakeven level for
the six months ended January 31, 2005 from an $8.1 million negative
position at the end of the first quarter. The company expects to
generate significant cash flows by year-end, particularly in the last
three months, its traditionally strongest quarter.

Operating Results

Grain Handling and Marketing

The Pool's Grain Handling and Marketing segment shipped 1.8 million
tonnes of grain and oilseeds in the second quarter of fiscal 2005, up
12% from the 1.6 million shipped in last year's second quarter. On a
year-to-date basis, shipments were 3.3 million tonnes, an increase of 9%
from the previous year. This compares favourably to the industry, which,
in the first half of 2005, experienced a 5% increase in western Canadian
shipments of the six major grains.

Producer deliveries into the Pool's primary elevators were 1.8 million
tonnes during the quarter, which is up 22% from the second quarter last
year. On a year-to-date basis, producer deliveries totaled 3.4 million
tonnes versus 3.1 million tonnes in the first six months of 2004,
reflecting increased production in Saskatchewan, the Pool's primary
market region. The Pool's western Canadian market share at January 31,
2005 was 23% compared to 21% after the first six months of 2004.

Total port terminal volumes through the Pool's wholly owned export
facilities were 1.1 million tonnes in the second quarter, up
approximately 19% from the second quarter of 2004. For the six months,
the Pool's wholly owned ports received 2.0 million tonnes of grains and
oilseeds, which is on par with the previous year's period.



Six Months Ended January 31
Volumes
(in thousands of metric tonnes)

Increase
2005 2004 (Decrease)
------------------------------------------------------------------------
Primary elevator receipts 3,439 3,136 10%
------------------------------------------------------------------------
Primary elevator shipments 3,324 3,039 9%
------------------------------------------------------------------------
Terminal operations
Vancouver 1,175 1,241 (5)%
Thunder Bay 844 753 12%
Share of affiliates 288 156 85%
------------------------------------------------------------------------
Total terminal operations 2,307 2,150 7%
------------------------------------------------------------------------
------------------------------------------------------------------------


The Pool's pipeline margin per tonne for the quarter was $16.76, up from
the $14.84 per tonne generated in the first quarter, but behind the
$20.43 earned in the second quarter of last year. Margins in the first
six months of 2005 ($15.88) are lagging 2004 levels ($22.29) because of
this year's poor crop quality, low commodity prices and the abundance of
feed grain in the Prairie system. The early frost and delayed harvest
has made it difficult to secure sufficient quantities of grains and
oilseeds to meet sales commitments in the first six months. As well, CWB
storage and interest revenue is down due to lower inventory levels.
Management believes that margins will strengthen through the remainder
of the year but will remain approximately 10% to 15% behind the $20 to
$22 average margin per tonne that is typical in a normal year.

EBITDA from the Grain Handling and Marketing segment for the quarter was
$8.0 million, which compares to $19.8 million of EBITDA generated in the
second quarter of fiscal 2004. On a year-to-date basis EBITDA was $9.5
million (includes $1.6 million of one-time items) compared to $32.5
million (includes $6.5 million of one-time items). After excluding all
one-time items, EBITDA for the six months declined by approximately
$18.1 million. EBIT for the quarter was $5.1 million compared to $17.5
million last year, and $4.0 million for the six months compared to $27.8
million in the first half of 2004.

Agri-products

The Pool's Agri-products segment generated a 14% increase in sales
during the second quarter of 2005, driven by increased fertilizer
demand. Because of the late harvest in the fall of 2004, fertilizer
applications in the first quarter were slow. However, during the second
quarter, farmers were able to apply significant amounts of fertilizer
post harvest. On a year-to-date basis, the Agri-products segment
generated $127.4 million in sales, up from the $125.0 million in the
first six months of 2004. This increase was driven by more fertilizer
sales and to a lesser extent an increase in the sale of seed. The second
quarter is typically the slowest period for crop protection product
sales as most of those inputs are purchased in the spring.

EBITDA for the quarter more than offset the first quarter loss. EBITDA
was $5.4 million, which compares to $4.0 million in the second quarter
last year. Year-to-date Agri-products EBITDA was $2.0 million, about
double the EBITDA generated in the first six months of 2004. EBIT for
the quarter was $2.8 million up from $1.7 million in the second quarter
last year. On a year-to-date basis, EBIT was a loss of $3.2 million
versus a loss of $3.7 million. Because of the seasonality of the
business, the majority of the earnings in this segment are recorded in
the fourth quarter given the significance of the spring selling season
on earnings and the fixed cost nature of the Pool's expansive Western
Canada retail operation.

"The new management team driving our Agri-products segment has been
performing well and is implementing new business strategies that are
allowing this essential core operation to gain momentum in the
marketplace", says CEO Schmidt. "We are excited with their progress."

Agri-food Processing

The Agri-food Processing segment generated sales for the quarter of
$30.0 million compared to $26.1 million in sales during the second
quarter of 2004. On a year-to-date basis, sales were up 6% to $61.1
million versus $57.3 million in the previous year. Strong demand for
whole oat flour and finished products through Can-Oat produced sales
that were slightly ahead of last year. Prairie Malt sales were up 24%
compared to the previous year's period when the company experienced
abnormally low sales because of poor crop quality. This year, additional
sales were also generated in the Japanese and North American markets.

Segment EBITDA for the quarter was $5.1 million just slightly below the
$5.6 million earning in the second quarter of 2004. On a year-to-date
basis, EBITDA was $8.9 million compared to $9.2 million for the first
six months of 2004. Both Prairie Malt and Can-Oat generated similar
EBITDA relative to last year's first six months. Segment EBIT for the
second quarter was $3.8 million compared to $4.4 million and on a
year-to-date basis was $6.4 million compared to $6.6 million in 2004.

Outlook

The Pool's grain shipments for fiscal 2005 are expected to exceed 2004
levels, the extent to which will be dependent on a number of factors
including grain prices, exports and the potential for a good crop next
year. If grain prices remain low, farmers may choose to hold back a
portion of their crop in an effort to blend it with a higher quality
crop next year. However, if prospects for the next year's crop are good,
farmers will also have to ensure they have adequate storage on-farm,
which would force grain into the marketplace during the spring and early
summer months. The ability to secure export demand for lower quality
grains and oilseeds for the remainder of the year will also be key to
2005 volumes.

For the Pool's Agri-products business, current moisture conditions are
encouraging for the spring selling season. Fertilizer sales are expected
to be brisk in the spring if moisture conditions hold. There is also
potential for a good crop protection products sales season given poor
fall weed control. However, the Pool's Agri-products business is highly
seasonal and its results remain dependent upon farmers' seeding
intentions and good growing conditions throughout the season.



SASKATCHEWAN WHEAT POOL
CONSOLIDATED BALANCE SHEETS


(in thousands) January 31 January 31 July 31
AS AT 2005 2004 2004
------------------------------------------------------------------------

(unaudited) (unaudited) (audited)

ASSETS
Current Assets
Cash $ 4,209 $ 84 $ 17,169
Cash in trust 30,695 19,904 1,176
Short-term investments 34,675 24,382 25,999
Accounts receivable 110,280 151,998 164,234
Inventories 162,854 155,078 104,887
Prepaid expenses and deposits 21,735 16,551 9,810
Future income taxes 3,054 1,180 1,198
------------------------------------------------------------------------
367,502 369,177 324,473

Investments 5,166 5,005 5,051
Property, Plant and Equipment 260,303 273,791 266,842
Other Long-Term Assets 7,344 5,830 8,219
Future Income Taxes 95,565 80,324 95,565
------------------------------------------------------------------------

$ 735,880 $ 734,127 $ 700,150
------------------------------------------------------------------------
------------------------------------------------------------------------


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank indebtedness $ 6,567 $ 9,567 $ 29,805
Short-term borrowings 19,284 66,827 1,501
Members' demand loans 20,285 13,757 18,691
Members' Class A shares 1,774 1,787 1,783
Accounts payable and accrued
liabilities 211,322 181,352 150,745
Long-term debt due within one year 9,493 6,195 7,893
------------------------------------------------------------------------
268,725 279,485 210,418

Long-Term Debt 252,338 261,004 251,930
Other Long-Term Liabilities 34,972 38,161 40,980
Future Income Taxes 5,455 7,240 5,944
------------------------------------------------------------------------
561,490 585,890 509,272
------------------------------------------------------------------------

Shareholders' Equity
Share capital 85,548 74,069 81,287
Contributed surplus 212 140 177
Convertible Subordinated Notes
- equity component 134,553 126,084 128,635
Retained earnings (deficit) (45,923) (52,056) (19,221)
------------------------------------------------------------------------
174,390 148,237 190,878
------------------------------------------------------------------------

$ 735,880 $ 734,127 $ 700,150
------------------------------------------------------------------------
------------------------------------------------------------------------


SASKATCHEWAN WHEAT POOL
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)

(in thousands) Three Months Three Months Six Months Six Months
FOR THE January 31 January 31 January 31 January 31
PERIODS ENDED 2005 2004 2005 2004
(unaudited) (restated) (restated)
------------------------------------------------------------------------

Sales and Other
Operating
Revenues $ 322,283 $ 326,248 $ 550,989 $ 609,633
------------------------------------------------------------------------

Cost of Sales
and Expenses
Cost of sales and
operating expenses 295,827 288,946 514,540 551,292
Selling and
administrative
expenses 12,480 11,844 24,563 23,862
Amortization 6,838 5,971 13,277 12,003
------------------------------------------------------------------------

315,145 306,761 552,380 587,157
------------------------------------------------------------------------

Earnings (Loss)
Before Interest
and Taxes 7,138 19,487 (1,391) 22,476

Interest expense 8,706 9,241 18,061 19,417
------------------------------------------------------------------------

(Loss) Earnings
Before Corporate
Taxes (1,568) 10,246 (19,452) 3,059

Corporate taxes
(expense) recovery 675 (756) 2,929 (688)
------------------------------------------------------------------------

Net (Loss) Earnings
From Continuing
Operations (893) 9,490 (16,523) 2,371

Net Loss From
Discontinued
Operations - (14,279) - (16,966)
------------------------------------------------------------------------

Net Loss (893) (4,789) (16,523) (14,595)

Retained Earnings
(Deficit), Beginning
of Period (39,864) (42,223) (19,221) (27,388)

Accretion of equity
component of
Convertible
Subordinated Notes (5,166) (5,044) (10,179) (10,073)
------------------------------------------------------------------------

Retained Earnings
(Deficit), End
of Period $ (45,923) $ (52,056) $ (45,923) $ (52,056)
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and Diluted
(Loss) Earnings
Per Share

From Continuing
Operations $ (0.03) $ 0.02 $ (0.12) $ (0.04)
------------------------------------------------------------------------
------------------------------------------------------------------------

Net Loss $ (0.03) $ (0.05) $ (0.12) $ (0.13)
------------------------------------------------------------------------
------------------------------------------------------------------------


SASKATCHEWAN WHEAT POOL
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands) Three Months Three Months Six Months Six Months
FOR THE January 31 January 31 January 31 January 31
PERIODS ENDED 2005 2004 2005 2004
(unaudited) (restated) (restated)
------------------------------------------------------------------------
Cash From (Used in)
Operating Activities

Net (loss) earnings
from continuing
operations $ (893) $ 9,490 $ (16,523) $ 2,371
Add (deduct) items
not involving cash
Amortization 6,838 5,971 13,277 12,003
Future income
taxes expense
(recovery) (460) 111 (2,345) 131
Equity loss (earnings)
of significantly
influenced companies - - - -
Pension 538 366 1,072 1,147
Interest accretion 2,979 2,574 5,851 5,056
Other items (209) (1,306) (671) (960)
------------------------------------------------------------------------
Cash flow from
continuing operations 8,793 17,206 661 19,748
------------------------------------------------------------------------

Changes in non-cash
working capital items
Accounts receivable 53,567 17,737 54,197 68,470
Inventories (16,452) (21,264) (57,967) (40,669)
Accounts payable 1,245 (24,225) 54,536 16,044
Prepaid expenses
and deposits (6,058) (4,821) (11,834) (7,732)
------------------------------------------------------------------------
Changes in non-cash
working capital -
continuing operations 32,302 (32,573) 38,932 36,113
------------------------------------------------------------------------
Cash from (used in)
operating activities
- continuing
operations 41,095 (15,367) 39,593 55,861
Cash used in operating
activities -
discontinued
operations - (1,859) - (1,303)
------------------------------------------------------------------------
Cash from (used in)
operating activities 41,095 (17,226) 39,593 54,558
------------------------------------------------------------------------

Cash From (Used in)
Financing Activities

Repayment of
long-term debt (1,325) (1,920) (3,843) (3,754)
Proceeds (repayment)
of short-term
borrowings 18,817 27,907 17,783 (33,270)
Repayment of other
long-term
liabilities, net (4) (2,246) (512) (3,173)
Proceeds of members'
demand loans 2,229 3,349 1,594 4,592
Repayment of members'
Class A shares (8) (3) (9) (4)
Cash used in
discontinued
operations - (114) - (494)
------------------------------------------------------------------------
Cash from (used in)
financing activities 19,709 26,973 15,013 (36,103)
------------------------------------------------------------------------

Cash From (Used in)
Investing Activities

Property, plant
and equipment
expenditures (2,771) (2,050) (6,675) (3,564)
Proceeds on sale
of property, plant
and equipment 203 435 967 971
Increase in cash
in trust (28,155) (19,365) (29,519) (19,417)
Increase in
investments (191) - (173) -
Increase in other
long-term assets (16) (168) (252) (360)
Cash provided by
(used in)
discontinued
operations - 121 - (491)
------------------------------------------------------------------------
Cash used in
investing
activities (30,930) (21,027) (35,652) (22,861)
------------------------------------------------------------------------

Increase (Decrease)
in Cash and Cash
Equivalents 29,874 (11,280) 18,954 (4,406)

Cash and Cash
Equivalents,
Beginning of Period 2,443 26,179 13,363 19,305
------------------------------------------------------------------------

Cash and Cash
Equivalents,
End of Period $ 32,317 $ 14,899 $ 32,317 $ 14,899
------------------------------------------------------------------------
------------------------------------------------------------------------

Cash and cash equivalents consist of cash, short-term investments and
bank indebtedness.

Supplemental disclosure of cash (paid) recovered during the period
from continuing operations:
Interest paid $ (6,184) $ (7,173) $(12,388) $(14,733)
Income taxes
recovered (paid),
net $ 1,651 $ (3,044) $ 713 $ (3,670)



SASKATCHEWAN WHEAT POOL
SEGMENTED FINANCIAL INFORMATION
FOR THE PERIOD ENDED JANUARY 31, 2005
(Unaudited and in thousands)

Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
January 31 January 31 January 31 January 31
2005 2004 2005 2004

SALES (restated) (restated)
------------------------------------------------------------------------
------------------------------------------------------------------------
Grain Handling and
Marketing $ 221,420 $ 238,933 $ 370,200 $ 438,605
Less: Sales to
Discontinued Operations - (1,900) - (4,136)
------------------------------------------------------------------------
Grain Handling and
Marketing - Restated 221,420 237,033 370,200 434,469
Agri-products 75,364 65,957 127,378 125,026
Agri-food Processing 30,054 26,098 61,056 57,335
Intersegment sales (4,555) (2,840) (7,645) (7,197)
------------------------------------------------------------------------
$ 322,283 $ 326,248 $ 550,989 $ 609,633
------------------------------------------------------------------------
------------------------------------------------------------------------


SASKATCHEWAN WHEAT POOL
SEGMENTED FINANCIAL INFORMATION
FOR THE PERIOD ENDING JANUARY 31
(Unaudited and in thousands)


(restated)
----------------------------- -----------------------------
Segment January 31, 2005 January 31, 2004
Earnings
- Three
Months EBITDA Amortization EBIT EBITDA Amortization EBIT
----------------------------- -----------------------------
Grain
Handling
and
Marketing $7,995 $(2,906) $5,089 $19,813 $(2,340) $17,473
Agri-products 5,424 (2,647) 2,777 4,042 (2,360) 1,682
Agri-food
Processing 5,122 (1,285) 3,837 5,628 (1,271) 4,357
----------------------------- -----------------------------
Segment
Results 18,541 (6,838) 11,703 29,483 (5,971) 23,512
Corporate
expenses (4,565) - (4,565) (4,025) - (4,025)
----------------------------- -----------------------------
Per Financial
Statements $13,976 $(6,838) $7,138 $25,458 $(5,971) $19,487
----------------------------- -----------------------------



(restated)
----------------------------- -----------------------------
Segment January 31, 2005 January 31, 2004
Earnings
- Year to
Date EBITDA Amortization EBIT EBITDA Amortization EBIT
----------------------------- -----------------------------

Grain
Handling
and
Marketing $9,511 $(5,488) $4,023 $32,498 $(4,680) $27,818
Agri-products 2,005 (5,218) (3,213) 1,025 (4,764) (3,739)
Agri-food
Processing 8,935 (2,571) 6,364 9,154 (2,559) 6,595
----------------------------- -----------------------------
Segment
Results 20,451 (13,277) 7,174 42,677 (12,003) 30,674
Corporate
expenses (8,565) - (8,565) (8,198) - (8,198)
----------------------------- -----------------------------
Per Financial
Statements $11,886 $(13,277)$(1,391)$34,479 $(12,003) $22,476
----------------------------- -----------------------------


Forward Looking Information

Certain statements in this Press Release are forward-looking and reflect
the Pool's expectations regarding future results of operations,
financial condition and achievements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance and achievements of the Pool
to be materially different from any future results, performance and
achievements expressed or implied by those forward-looking statements. A
number of factors could cause actual results to differ materially from
expectations, including weather conditions, crop production and crop
quality in Western Canada; world agricultural commodity prices and
markets; producers' decisions regarding total seeded acreage, crop
selection and utilization levels of farm inputs such as fertilizers and
crop protection products; the extent of the company's financial leverage
and funding requirements; credit risk; foreign exchange risk; changes in
the grain handling and agri-products competitive environments, including
pricing pressures; Canadian grain export levels; changes in government
policy and transportation deregulation; international trade matters;
global political and economic conditions, including grain subsidy
actions and tariffs of the United States and the European Union;
competitive developments in connection with the Pool's grain handling,
agri-products, agri-food processing businesses and other operations; and
environmental risks and unanticipated expenditures relating to
environmental and other matters.

Saskatchewan Wheat Pool is a publicly traded agri-business headquartered
in Regina, Saskatchewan. Anchored by a Prairie-wide grain handling and
agri-products marketing network, the Pool channels Prairie production to
end-use markets in North America and around the world. These operations
are complemented by agri-food processing and strategic alliances, which
allow the Pool to leverage its pivotal position between Prairie farmers
and destination customers. The Pool's Class B shares are listed on the
Toronto Stock Exchange under the symbol SWP.NV.B.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Saskatchewan Wheat Pool
    Susan Cline
    Media Contact
    (306) 569-6948
    or
    Saskatchewan Wheat Pool
    Colleen Vancha
    Investor Contact
    (306) 569-4782
    Website: www.swp.com