2004 Crown Investments Corporation of Saskatchewan Annual Report
2004 Crown Investments Corporation of Saskatchewan Annual Report
2004 Crown Investments Corporation of Saskatchewan Annual Report
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MANAGEMENT’S DISCUSSION AND ANALYSISInvestment<strong>Saskatchewan</strong><strong>2004</strong> ResultsEarnings were $19.3 million (2003 - $7.5 million). Investment <strong>Saskatchewan</strong> Inc.’s six largest investmentsmade up the majority <strong>of</strong> revenue, earnings, and assets.Revenue <strong>of</strong> $274.0 million (2003 - $209.4 million) increased $64.6 million primarily due to:Receipts from HARO Financial <strong>Corporation</strong> (HARO) <strong>of</strong> $154.5 million (2003 - $Nil). Of these receipts,$30.9 million was recorded as interest income, with the balance being applied as principal repayments.Strong fertilizer prices.High prices combined with favourable production and sales volumes from oriented strand boardoperations.Expenses <strong>of</strong> $217.9 million (2003 - $203.3 million) increased $14.6 million primarily due to increased cost <strong>of</strong>goods sold in support <strong>of</strong> increased sales volumes.Provisions for loan losses and writedowns <strong>of</strong> investments totaled $36.8 million (2003 - recovery <strong>of</strong> $1.4million). The outlook for pulp prices and the strong Canadian dollar have caused uncertainty as to timing<strong>of</strong> future loan repayments from Meadow Lake Pulp Limited Partnership (MLPLP). As a result, Investment<strong>Saskatchewan</strong> Inc. has taken a provision for accounting purposes <strong>of</strong> $30.0 million against its loans to MLPLP.Long-term debt was $60.4 million (2003 - $64.5 million).Purchases <strong>of</strong> investments were $8.4 million (2003 - $25.7 million) and purchases <strong>of</strong> property, plant andequipment were $2.5 million (2003 - $8.8 million).2520151050Earnings ($ millions)19.37.5<strong>2004</strong> 200370605040Debt ($ millions)64.560.4<strong>2004</strong> 2003Capital Spending ($ millions)4034.5302010.9100<strong>2004</strong>20032005 OutlookShould suitable opportunities arise, Investment <strong>Saskatchewan</strong> Inc. anticipates a further $50 million ininvestments.HARO does not expect to receive any distributions from its investment in <strong>Crown</strong> Life Insurance Companyduring 2005. Investment <strong>Saskatchewan</strong> Inc. will actively pursue means <strong>of</strong> accelerating repayments.Although pulp prices are expected to strengthen from <strong>2004</strong> levels, the exchange rate is expected to have anongoing negative impact on Canadian pulp producers throughout 2005.Oriented strand board (OSB) prices are projected to be weaker than those experienced in <strong>2004</strong>.High natural gas prices and declining fertilizer prices will pressure earnings from fertilizer operations.Continued pressure on livestock and meat industries is expected due to U.S. dollar exchange rates, BSE andmarket uncertainties.Key Factors Affecting PerformancePrices for pulp, OSB, livestock and meat.Demand for meat products and livestock due to BSE and other market uncertainties.U.S./Canadian exchange rate.Input costs for livestock operations (feed) and pulp (bleaching chemicals, wood, liquid and natural gas).North American real estate markets, risk management practices, investment performance, and outcomes <strong>of</strong>outstanding insurance litigation that impact results <strong>of</strong> insurance operations.C I C58
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