Milestone year for Richardson International

by Leo Quigley
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2013 has been a busy year for Richardson International Limited. Not only is the company celebrating the 100th anniversary of Richardson Pioneer, its grain and crop inputs business, it completed the largest acquisition in its history by acquiring a significant number of former Viterra grain, crop inputs and milling assets from Glencore, making it the largest Canadian agribusiness company.

There were times when it seemed that a privately-owned firm such as Richardson had little to no chance of becoming the top gun in the grain business. But the landscape changed with the implosion of the farmer-owned co-operatives and, finally, the sale of Viterra (formerly the Saskatchewan Wheat Pool) to Swiss-owned Glencore International PLC.

At the same time, changes were occurring at the Canadian Wheat Board as Ottawa stripped the powerful grain marketing agency of its monopolistic powers in favor of an open market — a move that pleased many Western Canadian farmers as well as Canada’s trading partners worldwide, most of which were opposed to “single desk selling.”

Glencore’s purchase of Viterra and accompanying agreement with Richardson for the sale of selected Viterra assets brought the federal government and Canadian Competition Bureau onto the scene to ensure the purchase by a foreign multinational was a net benefit to Canada and did not give one player an unfair competitive advantage in the West.

The deal between Glencore and Richardson resulted in Richardson’s acquisition of 19 Viterra grain handling facilities and 13 crop input centers, primarily in areas where Richardson did not have a strong presence previously, growing its network of Richardson Pioneer grain elevators and crop inputs centers across Western Canada.

Richardson also acquired an export terminal in Thunder Bay, a 25% ownership share of the Caascadia terminal in Vancouver and Viterra’s oats processing and wheat milling business.

With Richardson’s Eastern Canadian business, which sources grain from producers for delivery to its facilities in Hamilton, Ontario and Sorel, Quebec as a result of the Glencore deal Richardson is now the largest handler of Canadian grain.

Richardson has also ventured into new territory through the acquisition of Viterra’s milling business. This includes three oat processing facilities in Canada — in Barrhead, Alberta; Martensville, Saskatchewan; and Portage la Prairie, Manitoba — and two milling plants in the U.S. — an oats processing plant in South Sioux City, Nebraska and a wheat milling plant in Dawn, Texas.

Operating under the Richardson Milling brand, the oat and wheat milling business furthers Richardson’s diversification into value-added processing. It allows the company to expand its processing capacities and build on Richardson’s success in canola processing.

Richardson was one of the first companies to market canola oil and now operates two successful canola processing plants in Lethbridge and in Yorkton, both of which are undergoing upgrades and expansions to keep up with growing demand for canola oil.

In addition to crushing and processing canola oil, Richardson produces canola-based margarines, oils and shortenings under its Canola Harvest retail brand and produces a wide range of private label products for major food manufacturers in Canada and the U.S.

“With Richardson Milling, we are excited to continue our diversification into value-added processing and build on the success we have achieved in canola processing,” said Richardson International CEO Curt Vossen. “The oat processing business also provides us with an opportunity to establish a presence in the U.S., which will increase our profile and enhance our ability to meet the needs of the global marketplace.”

The milling business also gives Richardson a permanent presence in the U.S. market. Today, Richardson’s grain handling business in Canada is approaching its optimal size, which leads Vossen’s team to eye fresh opportunities in the U.S. and elsewhere.

Competing with the big boys

The question, of course, is whether or not a Canadian company could compete successfully in the U.S. environment.

In an interview with World Grain, Vossen said he foresaw no problem successfully competing in the U.S market. In fact, he said Richardson has been “doing it for years.” He said Richardson competes on a daily basis with large multinational grain companies such as Cargill, Archer Daniels Midland Co. and Bunge, which all have a presence in Canada, which all apply the same standards, the same business logic, the same access to capital, the same business strategy and the same excellence in terms of execution in the U.S. or Asia or anywhere else.

“We’ve competed in terms of the growth we’ve undertaken in the last number of years,” he said. “They’ve had a strategy; we’ve had a strategy. And all of us are here and prospering, it would appear to me, and I don’t see any difference going across the border into the U.S. or any other market. You’ve got to learn it. You’ve got to be thoughtful in your approach to it. You’ve got to study the market. They’ve had to do it here. We can certainly do it there.”

Vossen may be overly optimistic, or he may be right on the money. Besides building Richardson International into the largest Canadian agribusiness, last year Richardson was named one of Canada’s Best Managed Companies for the fourth year in a row by Deloitte, CIBC Commercial Banking, the National Post and Queen’s School of Business.

But even more importantly, seasoned observers of the grain business in Canada have called Richardson’s management team “shrewd” and have attributed the success partially to the fact that the company is privately owned.

This, they say, gives Richardson’s management team an opportunity to take time and assess a situation carefully before they make a move without facing the pressures of a publicly-owned company that constantly has shareholders biting at their heels to increase profits and make hasty decisions to satisfy the need to see the company making progress.

However, Vossen laughs at this analogy. “I think one of our weaknesses is our strength,” he said. “One thing about being a publicly-traded company is you have access to public capital. By necessity, we have to be patient and careful. We don’t have the resources to be able to leverage these kinds of opportunities, so we have to plan, anticipate and prepare. And then, whether you’re private or public, your shareholders want to see performance, and it’s all about execution.

What has continued to serve Richardson well with its shareholders is that the company has been performing, said Vossen.

“When we make a significant step, whether it was the acquisition of those assets a few years ago that was the result of the Saskatchewan Wheat Pool/Agricore United transaction or spending the capital we spent in the interim from 2007 to 2013, all of it is based on a very clear mandate and expectation on the part of our shareholders that they get the kind of return on their invested capital that any public shareholder would look to expect, or better.

“Our job is to make sure we find the right opportunities without an unlimited access to capital and that we execute on those opportunities effectively so that the next time around we might be able to participate in a larger transaction.”

Vossen said he believes the patience results from Richardson’s owners realizing that agriculture is a cyclical business and, therefore, they don’t expect things to follow a pre-determined path. They know that there are factors such as weather involved, but they also expect to receive returns that are equal, or better, compared to those of a public company.

Excited about the future

Asked what he expects Richardson will look like on its 200th anniversary, he said: “I hope we’re just as vibrant as we are today, bigger than we are today, as Canadian as we are today in terms of where we operate from and where our headquarters is. I’m particularly proud of being an international company, but with Canadian roots and a Canadian base.

“We’ve competed with the big boys in the market and we’ve competed with them right out of Winnipeg for more than 100 years, and we’re as successful as we’ve ever been. I would hope that we continue to have that Canadian base, that we continue to grow and that we become a larger and more relevant agriculture and food company. There are a lot of opportunities in the food side of the spectrum that we will continue to look to pursue.

“’We’re very excited about the future.”