alone |  A giant with feet of clay

alone | A giant with feet of clay

The Sollio agricultural cooperative is in serious financial difficulties. Terrible news for the Quebec agri-food industry.

Posted at 5:00 am

Andre Dubuc

Andre Dubuc
Press

The giant with its 8.2 billion dollars in turnover and its 16,150 employees lost money in 2021 in two of its three main divisions.

Sollio owns 84% ​​of Olymel, Quebec’s leading pork processor. Pork meat is one of the most important export products of the province with a turnover of 2,100 million in 2020. There are about 2,000 pig farmers in our interior.

Olymel suffered an operating loss of 60.2 million in 2021. Figures for 2022 are not yet available, but this division, which also processes poultry, does not make any money, various sources have indicated. Press.

Olymel has long been the source of income for its parent company, accounting for about 50% of its revenue.

Sollio, the former Coop fédérée, also operates in agricultural products such as fertilizers, seeds and cereals. It also owns the BMR hardware chain and is active in the sale of petroleum products with Sonic.

Its Agricultural division (grains) is also in financial difficulties with an operating loss of 22 million in 2021, in the absence of more recent data. Sollio does not disclose quarterly results.

multiple causes

Labor shortages, serial acquisitions, unfortunate strategic decisions, and the rising cost of money all contributed to Sollio’s setbacks.

Slaughterhouse jobs, despite an increase in wages, are not the most in-demand jobs in a context of labor shortages. Slaughterhouses will concentrate their workers on the slaughter line, but will lack workers to cut value-added pieces. They find primary cuts of low profitability.

Daniel-Mercier Gouin, retired professor at Université Laval and expert in agricultural economics

“We realized, with the labor shortage, that we had to better dedicate our workforce to value addition,” says Richard Vigneault, communications manager at Olymel. “So we reduced our purchases of pigs [de 530 000 par année à partir de mars 2022] to reduce sacrifice and be able to dedicate our workforce to value-added parts. Honestly, we had to refocus on profitability. »

Olymel also cut 177 management positions in mid-October and its parent company, Sollio, has started selling assets.

Last September, the cooperative announced the closure of six grain elevators in southwestern Ontario and their subsequent sale. At the end of October, it was the sale of its 50% stake in the logistics company Jefo, from Saint-Hyacinthe. In his 2021 annual report, Sollio had pointed to assets held for sale worth $100 million.

He hopes to solve his labor problems by relying heavily on temporary foreign workers, but the state’s processing of applications is bogged down.

The cooperative has already received assistance from Quebec in May 2021. “The government and Investissement Quebec have invested $150 million in shares in Olymel to support its development and strengthen its competitiveness,” Jean-Marc, spokesman Pierre D’Auteuil, said by email. of the Quebec Ministry of Economy.

Sollio’s main challenges

Costly strategic decisions

The recent construction of four grain silos in Quebec at a cost of 110 million turned out to be a financial drag. Unlike pork processing, where the sales cycle is fast and money flows quickly, grain processing is much slower with a long storage period. Furthermore, the Anse-au-Foulon silos are underused and were put up for sale last June. No transactions have materialized yet.

serial acquisitions

Olymel has made a series of acquisitions since 2015. It acquired Yamachiche’s A. Trahan and Trois-Rivières’ La Fernandière in 2016, Aliments Triomphe for $65.2 million and Ontario’s Pinty’s for $226 million in 2018 and F. Ménard, de Ange-Gardien, for 605 million in 2020, at the top of the cycle. Between 2015 and 2021, Sollio’s long-term debt fell from $220 million to $1 billion, and dividend-paying preferred stock from $175 million to $831 million.

800 million debt to be renegotiated

“In 2021, Sollio did not meet the financial ratios imposed in his debt contract,” says Jean Bédard, CPA and professor at Université Laval, who studied his financial results. The credit line of $1.3 billion, of which about $800 million is drawn, expires in June. “I’m not saying that Sollio won’t get his loan, but the conditions will be much more severe, in the sense that it will cost more,” he adds.

– with Marie-Eve Fournier, Julien Arsenault, Richard Dufour, Francis Vailles, Press


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