Agricore United issues a press release explaining their plans to expand business in Western Canada by using income trust.

 

Agricore United will consider a possible income trust conversion as it expands its business in Western Canada, says its top executive.

CEO Brian Hayward made the comments Tuesday during an investor conference sponsored by Scotia Capital (TSX:BNS), telling delegates his company intends to grow.

``One of the options that is available to us as a company is just to harvest our space and be in Western Canada,'' Hayward said.

``So, you know we're just going to continue to do what we did and ultimately, in the fullness of time, that may imply something like a structure as an income trust or like vehicle.''

But one industry analyst, who spoke on the condition of anonymity, said Agricore would not lend itself well to a trust structure because of its earnings volatility and the inherent seasonality of its business.

``The business does not have a lot of stability,'' the analyst said. ``I would question the merits of the company as an income trust because of the variability of the earnings.''

The Winnipeg-based agribusiness also said Tuesday it has obtained from a consortium of lenders a US$138-million secured loan maturing September 2013.

About US$50 million will be used to fund its recently completed US$38.5-million takeover of Texas-based feed manufacturer Hi-Pro Feeds, while the balance is earmarked for the repayment of a syndicated term loan and for general corporate purposes.

Hayward said Agricore is scouting for more deals, noting a wave of industry consolidation.

``We will be opportunistic,'' he said. ``If the valuations are right, (we will) look at opportunities to expand our operations through acquisitions.''

The company has already said its wants to expand its involvement in ``downstream processing'' and sees future opportunities in oil seed crushing, feed manufacturing and flour milling.

Meanwhile, it aims to expand the ``upstream'' aspect of its business, through channels such as seed development, by striking alliances with well-established industry players.

``That is such a complicated, technologically driven business,'' he said.

``Where we see our opportunity as is to be partners with a Monsanto (NYSE:MON), to be partners with a DuPont (NYSE:DD), and not to be competing with them.''

Agricore focuses on crop services, grain merchandising, livestock production services and financial services, with operations in Canada, the United States and Japan.

Earlier this month, it reported a 16 per cent increase in its third-quarter profit to $56.3 million on higher grain shipments. Its gross profit and net revenue from services for the period ended July 31 improved 3.1 per cent to $200.8 million.