Your cooperative is on track to have another good year. That said, all of you know it’s always treacherous to look too far out in the volatile world of agriculture.
A multitude of weather-related events could undermine what, to date, has been another good step to further strengthen MFA’s financial footing. Spring always plays a large role in agricultural profitability.
Still, we are a full 18 months ahead of the initial turnaround plan we developed in July of 2009 after the effects felt from the global financial crisis.
The numbers MFA’s management team presented at the late February and early March district delegate meetings reflected results from the first five months of our fiscal year—Sept. 1, 2011, to Jan. 31, 2012.
Those months were highlighted by an open harvest period, favorable weather that promoted fall field work, an unusually larger fertilizer movement in January and lower company grain ownership which translates into lower bank debt.
MFA posted total net sales of $558 million, a 6 percent increase over last year. In addition, we showed a 39 percent increase in field crop sales of $192 million. Sales of feed, farm supplies and animal health products totaled $77 million, an increase from $74 million last year.
Grain sales were lower, totaling $285 million in contrast to last year’s $312 million. Behind those numbers was a decrease of 5 million bushels of grain, reflecting an almost territory-wide decrease in yields.
MFA’s net income for the period was $7.1 million versus $7.9 million last year. Expenses have remained flat. MFA has a forecasted profit of $12.2 million for this fiscal year. But again, this is agriculture. Weather will be a decisive factor.
These numbers are positive for several reasons. First and foremost, profitability is a good thing. But underlying the obvious are balance-sheet numbers that are moving in exactly the right direction.
MFA’s net worth continues to improve. For the period ending Jan. 31, 2012, net worth stands at $118 million versus $102 million in 2011. We continue to aggressively manage the balance sheet; working capital reflects positive growth; returns on our investments in our joint venture partnerships have been positive; and our debt level is manageable.
MFA’s mission statement and corporate strategies have been challenged, modified and disseminated to all senior management members so all players have a common understanding of the company’s role and scope.
We have developed an on-going business plan that guides each product line and each operating division. We have developed detailed corporate financial targets and will soon have detailed financial targets for each operating division. These financial targets are a rolling three-year forecast.
We continue to analyze each MFA location twice per year. We will build on each location’s successes and strengths. And we will develop corrective action plans if success is not being achieved.
Capital pledged for facility improvements, new construction projects, business expansion and new acquisitions has returned to pre-2009 levels.
Capital investments for acquisitions and business expansion must meet three criteria. The project must: complement or supplement existing business operations; meet targeted corporate financial
returns; and create value for the member/owners.
In addition, MFA has an expanded (extensive and intensive) employee training program on understanding the MFA business and business challenges.
We will continue with member education programs such as the MFA cooperator’s program.
Agriculture is good today, but MFA must be prepared when the business cycle turns downward. We will be prepared.
Let me end by saying thank you for your current and past support. It is my privilege to work for the MFA organization.
Bill Streeter is President and CEO of MFA Incorporated.