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Saskatchewan
Wheat Pool Inc. – A solutions company unlocking potential for Prairie farmers and
destination customers around the world
Agricultural
Agri-Support Activities & Products
(SWP-TSX)
Saskatchewan Wheat Pool
2625 Victoria Avenue
Regina SK Canada S4T 7T9
Phone: 306-569-4411
Mayo Schmidt
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
November 3, 2005
BIO:
Mayo Schmidt is President and Chief Executive Officer, as well as a Director, of
Saskatchewan Wheat Pool, a leading western Canadian agri-business recognized by Canadian Business Magazine among the top 50 most
important companies in Canada’s history.
Mr. Schmidt arrived at the Pool in 2000 and undertook a comprehensive restructuring plan
to cut costs, divest of non-core assets and close unprofitable operations. He implemented
a series of operational excellence initiatives within the core businesses of grain
handling and marketing, agri-products sales and agri-food processing to improve
productivity and generate additional efficiencies. His consistent bottom-line orientation
helped the company successfully manage through various financial challenges, including
three years of drought. Mr. Schmidt led a 2003 financial restructuring that ultimately
repositioned a significant portion of the company’s legacy debt into equity.
In 2005, Mr. Schmidt spearheaded a historic plan to transform the Pool from a co-operative
to a Canadian business corporation, creating a single class of common voting shares,
strengthening the governance structure and positioning the Pool to raise gross proceeds of
$150 million in equity to retire additional term debt. This recapitalization initiative
restored the Pool’s financial strength and has created the flexibility and
opportunity to grow the business and generate value for its shareholders.
Before joining the Pool, Mr. Schmidt led the
reorganization of ConAgra Global Specialty Crops businesses, which employ more than 600
people across the United States and in five international offices. Prior to that, Mr.
Schmidt led ConAgra's expansion into Canada. He also held a number of key management
positions of increasing responsibility at General Mills Inc. throughout the United States.
Mr. Schmidt is an active participant in business and
industry organizations and events. He is a Director of Saskatchewan Wheat Pool, Can-Oat
Milling, Western Co-operative Fertilizers and Prairie Malt Ltd. He is a member of the
Canadian Council of Chief Executive Officers (open to the top 150 Canadian corporations),
the C.D. Howe Institute, and a Director on The Conference Board of Canada. Mr. Schmidt is
also a Director of the Saskatchewan Roughriders.
Mr. Schmidt earned his Bachelor of Business
Administration (BBA) from Washburn University in 1980. At Washburn, he earned both
athletic and academic scholarships, and was honored as Washburn’s 2003 Alumni Fellow.
Mr. Schmidt has two daughters and makes his home in
Regina, Saskatchewan, Canada.
Company Profile:
Saskatchewan Wheat Pool is a Canadian publicly traded agri-business and is a leading
service provider in Saskatchewan, Alberta and Manitoba. The Pool's business model
optimizes its key position in the agri-food pipeline, connecting Prairie producers to
destination customers around the world. From farm gate to end-use markets, the Pool offers
quality programs and services to maximize value at each stage of its integrated pipeline.
The Pool's primary businesses are grain handling and marketing - supported by one of
Western Canada's largest agri-products retail marketing operations. Agri-food processing
is the third component of the Pool’s key areas of focus. Through joint ventures
and strategic alliance opportunities, the Pool has created an integrated agri-business
from field to table.
The company has the most efficient and sophisticated grain handling, processing and
marketing network in Western Canada. In addition to supplying Canadian Wheat Board
commodities, the Pool is one of the largest exporters of Canadian canola, pulses and
special crops, including peas, canary seed and mustard.
Together with export capabilities, superior logistics expertise and a talented team of
employees, the Pool's focus on quality has attracted a host of primary and destination
customers who demand excellent product quality, competitive prices and logistics
expertise. The Pool's philosophy for the past 80 years has been built upon a foundation of
customer satisfaction, dependable service, offering a full line of agricultural products.
CEOCFO: Mr. Schmidt,
what was your vision when you came to the company and where are you today?
Mr. Schmidt: “I was impressed by the Pool’s market
position and its strategic advantages. I looked at the company and I knew there was an
urgency to improve its financial and operating performance. We conducted a strategic
review of the company’s operating divisions, its businesses and investments, and
assessed their strategic and operational performance. We had high costs and a burdensome
debt load. It was necessary to divest a number of non-core assets and refocus on our three
major businesses, which are grain handling, agri-products and agri-food processing. The
other challenge was to balance the needs of a publicly-traded company with the
expectations that came from being a co-operative. There were some hard decisions that had
to be made, which included cutting jobs and closing rural facilities. The result has been
a new strategic direction and a more nimble organization, well positioned in a very
dynamic and competitive environment.”
CEOCFO: Where are you in
the process?
Mr. Schmidt: “I think the building blocks and foundation
have been created - the final step that was required allow the company to realize its full
potential. After more than a year of planning, the Pool launched a recapitalization
initiative last February that resulted in a number of positive outcomes. The first was the
continuance of the Pool as a corporation governed by the Canada Business Corporations Act
away from a cooperative class now of and replaced by a single class of voting common
shares. It also met the exchange of farmer control class “A” shares and
secondly, the Pool executed an exchange of $172 million of convertible subordinated notes
to common shares. What followed was the launch of a $150 million rights offering. The
proceeds were used to repay $100 million in debt and to support future working capital
needs of the company. The recapitalization was a major success and I believe a critical
turning point for the company. Our balance sheet is now one of the strongest in the
industry. Our increased liquidity and lower financing costs allow us to be more proactive
in seeking out new opportunities. This was the final step required to set the stage for
the company to realize its full potential in moving from a good company to a great
company.”
CEOCFO: Will you tell us
about your three major divisions?
Mr. Schmidt: “We have our grain division, our
agri-products division, and our agri-food processing division. As we look at those going
forward, we see the grain infrastructure as our footprint; it generates a substantial
percentage of our profits. The agri-products division is tied to that because we sell
agri-products and grain handling all within the same bundle, maximizing value for our
producers. Our grain footprint, supported by our agri-products, supports the origination
of products necessary for our food processing companies. We take our chemicals,
fertilizers, and seed products and sell those to the producer and encourage the producer
to return his production to us. From that, we market commodities around the world as well
as to our own processing companies. It is an integrated system and we look at it as a
pipeline in which we perform a significant number of services and transactions for
customers at both the origin and destination points. The company receives fees at each
stage of pipeline.”
CEOCFO: How do you
continue to implement the Pool’s philosophy of customer satisfaction, quality
products, and dependable service as you move forward and grow?
Mr. Schmidt: “One of the Pool’s key strengths is
developing marketing relationships that draw on our competitive expertise and expand
international demand for our products. At home we have led industry consolidation. In our
own operation, we strive for operational excellence by providing program solutions to our
producers that promote efficiency, creativity and bottom line results. We see
opportunities going forward to grow our market share through program and service
development and through supply agreements, strategic alliances and joint ventures.”
CEOCFO: What role does
technology play for you and does it go down to the original farmer level?
Mr. Schmidt: “Yes it does. We use technology to track a
number of things such as production and our relationship with our producer customers in
terms of their farming needs, his crop input use all the way through to the marketing
strategies and demand requirements of our international customers. It is an important
management information tool. We are also ISO and HAACP certified, which allows us to
identity preserve products going through our systems. This benefits our destination
customers in terms of food security and it pays great dividends for our producers because
there is a higher return for them.”
CEOCFO: How do you reach
the investment community?
Mr. Schmidt: “We do regular road shows that have allowed
us to meet several institutional investors face to face. They were very impressed by the
way the Pool restructured itself financially, resulting in a stronger balance sheet and
increased liquidity. Our recent rights offering, which was substantially over-subscribed,
provided many investors with a look at the new company. It generated excitement about our
new direction. Our challenge will be to keep the Pool’s story in front of the market
to attract longer term value investors to the company.”
CEOCFO: Are the farmers
happy with the changes?
Mr. Schmidt: “Producers realize just how competitive the
agriculture industry is today and thus have been generally supportive of the Pool’s
new direction. They understand that the Pool needed to secure its financial footing in
order to remain an industry leader and continue to serve them in the best way possible. We
are considered an icon of business here in Western Canada. Producers now see themselves
dealing with a competitive, very financially sound organization, which has resulted in a
two point, or 10% increase in our market share.”
CEOCFO: What do you see
as your biggest challenges going forward?
Mr. Schmidt: “The biggest challenge is addressing over
capacity in the industry as it continues to impact prospects for agriculture going
forward. We are implementing program to insulate the company. We have grain volume
insurance in place this year to help alleviate any drought-resulting impacts to our
earnings. We are encouraging industry deregulation to allow efficiencies that benefit both
producers and the companies that provide the services to the producer community.”
CEOCFO: Why should
potential investors be interested and what should they know that might not be apparent at
first glance?
Mr. Schmidt: “I think that investors should know that
our balance sheet is one of the strongest in the industry and our debt is down 38%
year-over-year. We remain a leader in Western Canadian agriculture. Our market share is up
a couple points and we enjoy a 35 per cent market share in the province, which is where
over 50 per cent of the grain is grown. We have a strong management team along with a
Board of Directors that are bring significant expertise from diverse industries across
Canada and the U.S.”
CEOCFO: In closing, has
the investment community been supportive of the direction of the company?
Mr. Schmidt: “We have made the transition to a Canadian
business corporation. The investment community has been tremendously supportive with the
company’s direction. As we look at our recapitalization, it has turned our balance
sheet into one of the strongest in the industry. Our debt to equity ratio has moved from
over 60 per cent debt to closer to 30 per cent debt. We remain a leader in western
Canadian Agriculture sector. Our governor’s model and our Board of Directors are
stronger and more representative today of our investor base, which has been a key priority
for the company. We are located in the heart of Canada’s growing regions, which is
over 50 per cent of all Canadian grain, which is grown in Saskatchewan, and in that
particular marketplace, we enjoy a 35 per cent market share.”
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