Regina pasta plant project put off to 2013

An international pulse packing and export firm’s plans to build and open a major pasta and pulse processing plant in Regina by mid-2012 will now wait until next year at the earliest.

Alliance Grain Traders (AGT) said Thursday that its pasta plant, which attracted Prime Minister Stephen Harper and federal Agriculture Minister Gerry Ritz to its announcement last October, "is now planned to begin in 2013 in order to allow us to monitor developments in the North American grain industry."

AGT announced the deferral in its first-quarter financial report on Thursday, in which it booked net earnings of $2.77 million on revenues of $197.4 million for the period ending March 31, down from $7.18 million profit on $168.1 million in revenues in the year-earlier period.

"Capital programs in 2012 are being scaled back and some projects and expenditures are being deferred to 2013 and beyond, as we are focused and committed to ensuring that the business returns to a more normalized profitability and margin," AGT CEO Murad Al-Katib said Thursday.

"Pending developments, such as the de-monopolization of the Canadian Wheat Board and the proposed sale of Viterra to Glencore, as well as the free trade negotiations between Canada and the (European Union), will continue to reshape the landscape of the industry.

"Accordingly, management believes it is prudent to focus on our balance sheet at this time and improve our business metrics."
AGT, which already runs 12 pulse processing plants in Western Canada, is optimistic about the "opportunities presented by our current asset footprint," he said.

The planning and design work for "larger projects" such as the pasta and pulse plant, a project valued at up to $50 million, "will continue so that they are ready for implementation when we feel it is the right time to do so," Al-Katib said.

The AGT complex in Regina was envisioned as a milling facility to process durum for the production of its Arbella pasta brand in Canada, and to process pulse crops into pulse flours, starches, proteins and fibres. Arbella is a brand owned by the Arbel Group, an AGT subsidiary and pasta processor based in Turkey.

A distribution centre at the same site was expected to tie into the planned Global Transportation Hub (GTH), a Regina industrial zone devoted to transportation and logistics facilities needing road, rail and intermodal access.

"Due diligence"

Last October’s announcement was hailed by the federal government and assorted groups supporting the deregulation of the CWB’s single marketing desk as proof that the planned end of the monopoly in August this year would open up processing opportunities on the Prairies.

"This significant investment in Regina is positive proof that the government’s commitment to opening Canada’s grain markets is attracting investors that are generating new jobs and economic growth," Harper said at the announcement, which did not include any federal funding for the facility.

"Obviously the management of (AGT) has now done its due diligence and discovered what grain farmers have known for decades: any kind of enterprise in the West faces brutal transportation economics simply because we are so far from any significant markets," Bill Gehl, chair of the pro-single-desk Canadian Wheat Board Alliance, said in a release Monday.

"They may have even discovered that with the loss of the Wheat Board’s single desk, small processors face an even bigger challenge."

The CWB, he said, "had a policy of treating all processors equally so large processors could not obtain volume discounts from farmers and push out smaller operations… and now that fairness will end with the single desk."

AGT "has learned (Harper) has no magic wand that can change the fact we produce grain behind a wall of mountain ranges and huge land distances to ocean ports," said Gehl, a Regina-area producer.

"The global economic conditions that have affected staple food markets are not over. However, we remain optimistic that we will see conditions return to normal in the near term," Al-Katib said Thursday.

"Importer hesitation brought on by decreased credit liquidity and currency devaluations, which has affected export demand, is beginning to turn around, which is good news for us. Consumption has remained strong for our products, and we expect that importers will need to refill their depleted local market stocks in the near term."

Related story:
Regina to host new pulse, durum processing plant, Oct. 8, 2011
Regina processor buys unfinished N.D. pulse plant, Nov. 4, 2011

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