SCATS profits slump due to feed and grain

20 June 1997

SCATS profits slump due to feed and grain

A SQUEEZE on margins in the animal feed and grain trading sectors led to pre-tax profits halving for southern counties co-op SCATS in the year to Jan 31, 1997.

"There were two main problems with animal feed," said managing director John Griffith. "On the raw material side, the price of imported soya and maize gluten moved dramatically away from us during the autumn of 1995 and into 1996, hitting margins.

"And then in late 1996, feed wheat also went against us, as we had to pay high prices for grain booked before the market dropped the previous April."

Grain hitch

Business also went awry on the grain side, when one trader took a position before the market collapse, without hedging it, explained Mr Griffith. This also hit profits.

Despite these problems, and the impact of BSE, turnover for the two sectors marginally increased in 1996/97. Prospects for the current season were also better, with a number of major feed compounders closing capacity in SCATS core trading area, giving the co-op a haulage advantage.

Dividend maintained

Including the groups other activities – machinery, arable inputs and retailing – turnover increased 5% to £74.5m, while agency sales for other grain co-ops stayed level at £28.9m. But pre-tax profit dropped 52% to just £691,000.

Despite this, SCATS is maintaining its dividend to the 2950 members at 5%, though there will be no trading bonus this year.

The balance sheet remains strong, with reserves increasing by £300,000 to £16m. Chairman Andrew Christie-Miller said he expected to see further rationalisation within the agricultural sector in the future and SCATS was well placed to make acquisitions when opportunities arose.n

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