Viewpoint

MFA posts a loss and projects a profit

Written by Bill Streeter on .

The strength of MFA’s balance sheet softened the blow of market volatility

MFA’s fiscal year (Sept. 1, 2008 to August 31, 2009) saw the economic freefall of the U.S. and world markets and the near collapse of the world financial sector. What a lousy year for business! I hope this country never again has to face those challenges. And while I’m at it, I hope the same for agriculture. The market didn’t treat MFA very well. We posted our largest loss year ever ($62 million), following closely upon the heels of our largest profit in fiscal 2007-08 ($34 million).

We’ve lost money before. None of us likes it. But, we’ve also used two decades of profitability to build MFA’s balance sheet and strengthen fundamentals by reinvesting in the business. MFA has been a viable presence in the marketplace for 95 years. Make no mistake; we’ll be here for another 95.

The strength we have spent years building allowed us to weather this world-wide economic collapse.

To better communicate the situation with you, our customer-owners, and at the direction of your corporate board of directors, we returned to the district meeting format rather than the centralized annual meeting we’ve held for quite a few years. The last of those meetings took place Dec. 4.

The move provided several benefits. These district meetings fostered open discussion. They also encouraged a give-and-take among management and members in an atmosphere allowing for honest discussion. You are the owners of this cooperative, and we value your input. We wanted you to understand the details behind the numbers. Specifically, the big losses occurred in plant foods and pork production, but market drops in generic glyphosate and several feed ingredients certainly didn’t help.

While it was a difficult year, it forced us to identify non-yielding assets and make smart, sometimes difficult, decisions in terms of selling assets. That very process allowed management to streamline the way MFA does business. We have a well-thought-out plan for moving your cooperative forward.

As a customer-owner, you will not see any radical change in the way MFA is positioned. What you will see is a company poised to continue moving forward as we have done for 95 years. Several of our bulk fertilizer plants were acquired by our local cooperatives. A few assets were repositioned with partners to continue serving the membership. We also closed several non-productive assets we should have closed earlier. I want to issue a sincere thank-you to all of our local cooperatives for their interest, commitment and support of MFA.

One positive that arises from difficult financial times is that it forces businesses (whether regional cooperatives like MFA or farming operations like yours) to honestly evaluate the true costs of operating a business and face the difficult decisions demanded by underperforming assets.

It’s important to keep in mind that we will not do anything with our business units or fixed assets that would in any way harm the short-term or long-term viability of MFA. As I have said in these pages before, member equity has in no way been diminished. MFA still has a net worth of nearly $85 million.

We made all of these decisions with the full support of the lending institutions we rely on. We continue to have credit arrangements in place to more than adequately fund MFA’s operations. We have the full support of these lenders and have enjoyed their support throughout this past fiscal year. They know MFA’s record of accomplishment.

The management of MFA has had frequent, open and honest conversations with our corporate board of directors, employees and delegates throughout this process. It’s the MFA way of doing business, and it’s the right way of doing business.

I want all of you to know that our business plan keeps us focused on rebuilding our balance sheet strength. The strength we have spent years building allowed us to weather this worldwide economic collapse. And I can assure you we have the controls in place to minimize the effects of future market volatility.

But all the focus for this past fiscal year should not be exclusively on the negative. Despite the world’s economic turmoil, MFA’s seed, grain, crop protection and retail divisions turned in very positive results. Those results underscore the fact that the cooperative business model is as strong now as ever. .

As your cooperative, MFA Incorporated took a hit, but we’re still standing. We’re projecting good profitability for this fiscal year.

We will achieve it. We will continue to strengthen the business. We will continue being a leader in today’s agriculture. And we will continue to develop, implement and innovate, as we have for nearly a century.

Bill Streeter is president and CEO of MFA Incorporated.

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