Ceres Global Ag Corp. Reports Results For Its First Quarter Ended June 30, 2015

TORONTO, Aug. 5, 2015 /CNW/ - Ceres Global Ag Corp. (TSX: CRP) ("Ceres" or the "Corporation") today announced its financial and operational results for the three months ended June 30, 2015.

Financial Results:

(in CAD) Three Months Ended
June 30, 2015
Three Months Ended
June 30, 2014
Revenue $59.3 million $51.5 million
Gross profit (loss) $1.9 million $1.2 million
Income (loss) from operations ($0.6 million) ($2.2 million)
Net income (loss) ($1.7 million) ($2.1 million)
Earnings (loss) per share basic and fully diluted ($0.06) ($0.15)
EBITDA (loss) 1 $57,000 ($1.8 million)

Highlights:

  • Gross profits for the quarter ended June 30, 2015 were $1.9 million compared to $1.2 million for the same quarter for the fiscal year ended 2014 due to increased net trading margins;
  • Revenues of $59.3 million in the first quarter of 2015 versus $51.5 million for the same period in 2014.
  • General and administrative expenses declined $0.9 million from $3.4 million in the first quarter of 2014 to $2.5 million for the first quarter of 2015;
  • Ceres entered into an agreement to sell its Electric Steel grain facility in Minneapolis, Minnesota, to the University of Minnesota for gross proceeds of US$1,450,000. The transaction is subject to final approval by the University's Board of Regents;
  • Recognized a non-cash expense, which totalled $0.8 million during the quarter for the revaluation of the derivative warrant liability relating to the warrants conditionally issued in connection with the rights offering in December 2014;
  • Continued to expand grain operations at Northgate, Ceres' new commodities logistics centre. During the quarter ended June 30, 2015, Ceres handled 0.6 million bushels of grain compared to 1.7 million bushels for the quarter ended March 31, 2015. There was no comparative period for the prior year. The decline quarter over quarter was due to normal seasonal road restrictions and producers beginning field work;
  • Through July 31, 2015, the Corporation has loaded 186 railcars of grain at Northgate;
  • Announced an agreement with a subsidiary of Parkland Fuel Corporation (TSX: PKI) for transloading propane at Northgate. Going forward, the Company anticipates Northgate could facilitate the transloading and shipment of additional payloads such as fertilizers or oil-based materials.
  • Through July 31, 2015, the Corporation has loaded 190 railcars of propane at Northgate.

"Northgate's build-out progressed on time and on budget during our first quarter," said Ceres chief executive officer Patrick Bracken. "While we are still in the building phase, we are not waiting to take advantage of the value and strategic location of Northgate as evidenced by the increased diversity of first quarter activity, which included grain and propane handling. We expect this business to grow throughout fiscal year 2016 by further leveraging the logistical advantages of Northgate with additional oilfield products and agricultural inputs."

Financial Highlights:

Ceres is principally involved in an agricultural commodity-based business, in which changes in selling prices generally move in relation to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural commodities that the business deals in will have a relatively equal impact on sales and cost of sales and a minimal impact on gross profit. Accordingly, management believes it is more important to focus on changes in gross profit than it is to focus on changes in revenue.

Gross profit for the first quarter of the current year increased $0.7 million to $1.9 million compared to $1.2 million for the first quarter of prior year. The increase was driven by a higher net trading margin of $1.8 million. The increase in net trading margin was offset by an increase in facility operating expenses of $0.7 million.

For the quarter ended June 30, 2015, general and administrative expenses totalled $2.5 million, which represents a decrease of $0.9 million. The reduction is due to incurring expenses relating to the build-out of Northgate that included consulting, engineering and outside services in prior year quarter, which were not incurred during the quarter ended June 30, 2015. A decline in such expenses was offset by an increase in the expense relating to the revaluation of provision for future payments due to Front Street Capital, which totalled $165 thousand for the quarter ended June 30, 2015.

For the quarter ended June 30, 2015, the Corporaiton incurred a non-cash expense of $836,000 relating to the revaluation of its derivative warrant liability. In connection with the rights offering in December 2014, the Corporation issued warrants, which are subject to shareholder approval at the annual general meeting. In the event of a change of control of the Corporation, the holders of the warrants may elect, in lieu of exercising the warrants for cash, a cashless exercise. If a warrant holder exercises this option, there will be variability in the number of shares issued per warrant.

In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity and must instead be classified as a derivative liability and measured at fair value with changes in the fair value recognized in the statement of operations and comprehensive loss at each period end. If the warrants are approved at the annual general meeting as described above, the warrants will ultimately be converted to the Corporation's equity (common shares) when the warrants are exercised, or will be extinguished upon the expiration of the outstanding warrants, and will not result in the outlay of any cash by the Corporation.

Consolidated EBITDA for the quarter ended June 30, 2015 was $57,000 compared to an EBITDA loss of $1.8 million for the same quarter a year ago.

Consolidated net loss was $1.7 million for the quarter ended June 30, 2015 compared to a net loss of $2.1 million for the prior year.

The Corporation's sources of liquidity as at June 30, 2015 are cash and cash equivalents and available funds under its revolving credit facility. Available cash and unused credit facilities for the quarter ended June 30, 2015 was $80.3 million versus $100.5 million for the quarter ended March 31, 2015.

Management believes that cash flow from operations will be adequate to fund operating expenditures, maintenance capital, interest, and any income tax obligations. Growth capital expenditures in the next 12 months will be funded by cash on hand and borrowing against the credit facility. Any additional debt incurred will be serviced by the anticipated increases in cash flow and will only be borrowed within the Corporation's debt covenant limits.

Outlook

Grain Division

During the quarter ended June 30, 2015, Ceres expanded its operations by opening a grain merchandising office in southeastern Ontario, which management expects will play a significant role in extending the Corporation's trading and merchandising reach into Ontario and the eastern Canadian markets, while enhancing the utilization of its Port Colborne, Ontario, facility. During the quarter ended June 30, 2015 and subsequent to quarter end, the Corporation has been entering into cash grain purchase and sales contracts in anticipation of the upcoming eastern Ontario harvest.

Ceres has expanded its existing hard wheat trading portfolio with the addition of key personnel, which has allowed the Corporation to expand its geographic procurement and merchandising reach throughout North America. Such efforts were beneficial in the quarter ended June 30, 2015, as Ceres' enhanced geographic reach allowed the Corporation to trade the increased premium levels profitably through procurement in key U.S. regions that Ceres ordinarily would not have had access.

Statistics Canada has reported slightly less seeded acres of cereal grain compared to prior year; however, there is no indication as to crop yields or anticipated cereal crop production. The seeded acres and crops tributary to our Northgate, Saskatchewan, terminal appear to be relatively favorable while crops further west and northwest have been challenged by a lack of moisture. Early crop production indications out of Manitoba suggest a very strong wheat crop, while areas in western Saskatchewan suggest weaker production than prior years, leaving Northgate central to both growing regions.

These early crop reports, coupled with our first crop year present in western Canada and with our commitment to enhancing our grain merchandising and trade flow capabilities as noted above, leads management to expect that these factors will contribute positively to the Corporation's net earnings through the rest of fiscal 2016. Furthermore, management expects to trade and handle more company-owned bushel volume in fiscal year 2016 than in fiscal 2015 with the intention that increased handling will lead to greater net trading margins and gross profits.

Logistics Division

Concurrent with its grain operations at Northgate, the Corporation entered into an agreement with Elbow River Marketing Ltd. (ERM), a wholly owned subsidiary of Parkland Fuel Corporation, to transload liquefied petroleum gas (LPG) at Northgate. Under this agreement, the Corporation unloads propane from inbound trucks loading it into railcars for shipment into the U.S. market via the BNSF from Northgate, Saskatchewan. This provides a direct link and an added access point for propane to enter the US market. Through July 31, 2015, the Corporation has loaded 186 railcars.

Management expects this business to grow throughout fiscal year 2016, as it is renegotiating and extending is current transloading agreement with ERM while exploring opportunities to build out and further develop its current LPG transloading business with additional tenant customers. In addition, the Corporation is pursuing opportunities that further leverage the international port advantages of Northgate with other oilfield products and agricultural inputs.

Conference Call Details

The Corporation will hold a conference call to discuss first quarter fiscal 2016 results on Wednesday, August 5, 2015 at 5:00 p.m. ET. Patrick Bracken, President and CEO, and Mark Kucala, CFO, will co-chair the conference call.

All interested parties can join the conference call by dialing 1-888-231-8191 or 647-427-7450, conference ID:  93807291. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Wednesday, August 19, 2015 at midnight, ET. To access the archived conference call, please dial 1-855-859-2056 and enter the encore code 93807291.

A live audio webcast of the conference call will be available at www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 365 days.

Non-IFRS Financial Measures

1EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) is not a standardized financial measure prescribed by IFRS; however, is one metric that is used by management to determine the Corporation's ability to service its debt and finance capital. EBITDA excludes gains and losses on property, plant and equipment and assets held for sale, as these items are considered to be non-reoccurring in nature.

In calculating EBITDA, Ceres excludes its share of the net income (loss) from investments in associates and the gain (loss) on sale or impairment of property, plant and equipment. Ceres may calculate EBITDA differently than other companies; therefore, Ceres' EBITDA may not be comparable to similar measures presented by other issuers.

Investors are cautioned that EBITDA should not be construed as alternatives to net income or loss, or to other standardized financial measures determined in accordance with IFRS, and are not intended to represent cash flows or results of operations in accordance with IFRS.

About Ceres Global Ag Corp. (ceresglobalagcorp.com)

Ceres Global Ag Corp. is a Toronto-based company focused on two primary businesses: a Grain Storage, Handling and Merchandising unit, anchored by its 100% ownership of Riverland Ag Corp., and a Commodity Logistics unit, containing its 25% interest in Stewart Southern Railway Inc. and its development of the Northgate, SK Commodity Logistics Centre. Riverland Ag Corp. is a collection of nine (9) grain storage and handling assets in Minnesota, New York, and Ontario having aggregate storage capacity of approximately 47 million bushels as at March 31, 2015. Riverland Ag also manages two (2) facilities in Wyoming on behalf of its customer-owner. Stewart Southern Railway Inc. is a short-line railway with a range of 130 kilometres that operates in South-eastern Saskatchewan. The Northgate Commodities Logistics Centre is a state-of-the art grain, oil and oilfield supplies transloading site being developed in conjunction with Riverland Ag and several potential energy company partners, connected to BNSF Railway.

Cautionary Notice: This news release contains "forward-looking information" within the meaning of applicable Canadian securities legislation and United States securities laws. Forward-looking information may include, but is not limited to, statements regarding future operations and results, anticipated business prospects and financial performance of Ceres and its subsidiaries, including the plans, costs, timing and capital for the development of the Northgate Commodities Logistics Centre, expectations or projections about the future, strategies and goals for growth, expected and future cash flows, costs, planned capital expenditures, regulatory change, general economic political and market conditions anticipated capital projects, construction and completion dates, operating and financial results, critical accounting estimates, the expected financial and operational consequences of future commitments. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", "believes", "may have implications" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved". Forward-looking information is based on the opinions and estimates of management at the date the information is made, and is based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information.  Key assumptions upon which such forward-looking information is based are listed in the "Forward-Looking Information" section of the interim MD&A for the year and quarter ended March 31, 2015. Many such assumptions are based on factors and events that are not within the control of Ceres and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking information include, among others, risks related to weather, politics and governments, changes in environmental and other laws and regulations, competitive factors in agricultural, food processing and feed sectors, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and currency exchange rates, technological developments, global and local economic conditions, the ability of Ceres to successfully implement strategic initiatives and whether such strategic initiatives will yield the expected benefits, the ability of Ceres to successfully defend the claim by The Scoular Company, the operating performance of the Corporation's assets, the availability and price of commodities and regulatory environment, processes and decisions.  Although Ceres has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results that are not anticipated, estimated or intended. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Ceres undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change, except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking information.

SOURCE Ceres Global Ag Corp.

For further information:

For investor relations, please contact:
Adam Peeler
National Equicom 
(416) 815-0700 ext. 225 
apeeler@tmxequicom.com


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