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Turnium Technology Group Inc. Management Reports 2025
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Management Reports
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39766279v2
NORTH WEST TERMINAL LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED OCTOBER 31, 2024
NORTH WEST TERMINAL LTD.
Management's Discussion and Analysis
NWT
The following Management's Discussion and Analysis was prepared as of February 11, 2025, and is intended to explain North West Terminal Ltd.'s ("NWT" or the "Company") operating results and financial position for the fiscal year ended October 31, 2024, compared with those of the two previous years. The following discussion and analysis should be read in conjunction with the audited financial statements and accompanying notes. The Company's audited financial statements have been prepared using International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). Additional information relating to the Company is available on SEDAR+ at www.sedarplus.ca.
1. Business Segment Performance
NWT's management team reviews NWT's operations by Grain and Fermentation & Distillation divisions. These divisions are strategic business units with different product inputs, processes, and marketing strategies.
Segment performance is evaluated on the basis of EBITDA. Management believes that EBITDA is an important indicator of NWT's ability to generate liquidity through operating cash flow to fund future working capital needs, service outstanding debt and fund future capital expenditures.
The accounting policies used within each division are consistent with the policies outlined in the notes to NWT's October 31, 2024 annual audited financial statements. Segmented revenues, expenses and results include transactions between segments that occurred during the ordinary course of business with normal market terms and conditions.
1.1. Grain Division
| For the year ended October 31 | 2024 | 2023 | 2022 |
|---|---|---|---|
| Sales | 85,762,363 | 195,364,587 | 196,317,147 |
| Dividend income | 885,201 | 3,195,212 | 1,157,934 |
| Revenue | 86,647,564 | 198,559,799 | 197,475,081 |
| Gross profit (loss) | 2,542,479 | (4,052,399) | 2,271,416 |
| General and administrative expenses | 7,356,400 | 6,258,721 | 5,842,282 |
| Interest and other income | 761,311 | 928,721 | 711,843 |
| EBITDA | (4,052,610) | (9,382,399) | (2,859,023) |
| Depreciation | 1,170,392 | 1,186,959 | 1,193,055 |
| Interest on short-term debt | 3,613,941 | 2,660,732 | 1,168,519 |
| Interest on long-term debt | 364,443 | 277,462 | 432,861 |
| Unrealized gain (loss) on interest rate swaps | (131,257) | (59,507) | 212,427 |
| Earnings (loss) before tax | (9,332,643) | (13,567,059) | (5,441,031) |
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
| Operating Statistics | 2024 | 2023 | 2022 |
|---|---|---|---|
| Tonnes handled by Grain Division | 216,093 | 352,089 | 360,536 |
| NWT grain (tonnes) | 173,340 | 301,728 | 313,605 |
| Tonnes Transferred: Fermentation & Distillation Division | 42,753 | 50,361 | 46,931 |
Total revenue from the Grain Division, which consists of buying, selling, cleaning and drying grain, and dividend income for the year ended October 31, 2024, was $87M. This is a 56% decrease from the revenue reported in the prior year (2023 - $199M). Decreased handling volumes were the primary driver for the decrease in grain sales revenue. Grain handling volumes decreased by 39% to 216,093 MT from 352,089 MT. Grain handling includes 42,753 MT (2023 - 50,361 MT) of grain that was transferred to the Fermentation & Distillation Division for the production of renewable ethanol and specialty alcohol. The Grain Division also saw a decrease in dividend income in the current fiscal year as compared to the prior fiscal year (2024 - $0.9M; 2023 - $3.2M).
Gross profit margin from the Grain Division improved from the prior fiscal year. The gross profit as a percentage of sales for the year ended October 31, 2024 was 2.9% compared to a loss of 2.0% in the prior year. Margin pressures in the industry continue as grain companies in the local area continue to compete aggressively for limited stocks. Note that interest on short-term debt has been removed from the calculation of the gross profit margin and EBITDA. The prior years have been recalculated to conform to the presentation of the current year.
General and administrative expenses increased by $1.1M or 18% for the year ended October 31, 2024 compared to the prior year. The Company saw increases in bank charges ($1.0M), insurance ($465K) and legal fees ($326K). This was offset by decreases in employee compensation ($243K), bad debts ($197K) and repairs and maintenance ($160K). The increases in bank charges is the result of the 0.2% weekly access fee on the $13M excess working capital provided by the lender on an as required basis to support the business. The increase in legal fees is related to the strategic alternatives process discussed below.
The Grain Division’s interest and other income for the current fiscal year decreased by $167K compared to the prior fiscal year. Included in interest and other income is revenue from the diversification of the Company's rail siding to facilitate various transloading activities.
On September 18, 2024, the Company announced that it would be idling its grain operations. As a result, purchases of grain from producers were suspended and the Company let its Primary Elevator Licence expire. It is expected that the elevator will remain idled indefinitely until either grain industry margins improve or part or all of the elevator is sold. The Company has engaged FTI Capital Advisors to evaluate potential strategic alternatives and determine what is in the best interests of the Company and all stakeholders.
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
2.2. Fermentation & Distillation Division
| For the year ended October 31 | 2024 | 2023 | 2022 |
|---|---|---|---|
| Sales | 30,424,962 | 34,488,832 | 30,231,316 |
| Gross profit | 2,599,354 | 3,358,186 | 3,551,259 |
| General and administrative expenses | 1,874,150 | 2,353,128 | 1,748,997 |
| Interest and other income | 14,359 | 24,200 | 5,532 |
| EBITDA | 739,564 | 1,029,258 | 1,807,794 |
| Depreciation | 2,255,739 | 2,226,161 | 1,938,859 |
| Interest on long-term debt | 116,059 | 193,497 | 209,887 |
| Unrealized gain (loss) on interest rate swaps | (63,644) | (28,854) | 103,003 |
| Plant and equipment impairment reversal | - | - | 4,500,000 |
| Earnings (loss) before tax | (1,695,879) | (1,419,254) | 4,262,051 |
| Operating Statistics | |||
| Litres/tonnes shipped by Fermentation & Distillation Division | |||
| Renewable Ethanol (litres) | 4,145,439 | 6,721,132 | 7,648,551 |
| Specialty Alcohol (litres) | 11,268,923 | 12,960,848 | 10,265,730 |
| Total (litres) | 15,414,362 | 19,681,980 | 17,914,281 |
| Plant-based protein (tonnes) | 14,928 | 17,540 | 15,685 |
The Fermentation & Distillation Division represents the ethanol manufacturing business of NWT and operates as North West Pure Alcohol and Spirits under the brand PURE. The Fermentation & Distillation Division produces both renewable fuel and specialty alcohol. Specialty alcohol includes alcohol used in the beverage, pharmaceutical and industrial markets.
Prices of inputs and outputs are affected by the supply and demand situation of the individual commodities and commodities that are close substitutes. Additionally, the price for renewable ethanol is heavily influenced by market values of crude oil.
Total sales from the Fermentation & Distillation Division for the year ended October 31, 2024, were $30.4M compared to $34.5M reported in the prior year, a decrease of 12%. The decrease is due to lower sales volumes of specialty alcohol as well as lower selling prices of renewable fuel. Sales volumes of specialty alcohol decreased by 13% from 12,960,848 liters in 2023 to 11,268,923 in 2024. The average selling price of renewable fuel decreased by 27% from $0.89/liter in 2023 to $0.65/litre in 2024.
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
The gross profit from the division was $2.6M for the fiscal year ended October 31, 2024. This is a 23% decrease over the prior fiscal year when the division realized a gross profit of $3.4M. Gross margin for the current fiscal year was 8.5% which was behind the prior year’s gross margin which was almost 10%. The division recorded $647K of carbon tax expenses in the year. $522K was related to the approvals received during the fiscal year of the emissions returns for the 2021, 2022 and 2023 compliance years under the Saskatchewan Output Based Pricing System. The Company is a regulated emitter under the program. These additional costs had a direct impact on gross profit as well as gross margins. Gross margin for the year would have been 10.3% without the additional carbon tax expense.
General and administrative expenses decreased by $479K or 20% from the prior fiscal year. Compared to the prior fiscal year, expenses related to repairs and maintenance decreased by $271K. General and administrative expenses also decreased as the allocation of fixed overhead production costs increased due to increased insurance costs and lower production volumes.
Production of undenatured ethanol used in the production of renewable ethanol was 30% lower in the current fiscal year than the prior year (2024 – 5,175,559 litres; 2023 – 7,360,505 litres). Correspondingly, shipments of renewable ethanol for the current fiscal year were 38% lower than the prior year (2024 – 4,145,439 litres; 2023 – 6,721,132 litres).
Shipments of plant-based proteins (PBP) were 15% lower than the prior year (2024 – 14,928 MT; 2023 – 17,540 MT). This decrease is a result of the overall decrease in production volumes as PBP’s are a co-product of the production of ethanol. Shipments are sold primarily into domestic livestock markets.
39766279v2
NORTH WEST TERMINAL LTD.
Management's Discussion and Analysis
NWT
3. Financial Results
3.1 Revenue, Gross Profit from Operations, EBITDA and EBIT
| For the year ended October 31 | 2024 | 2023 | 2022 |
|---|---|---|---|
| Sales | 116,187,325 | 229,853,419 | 226,548,463 |
| Dividend income | 885,201 | 3,195,212 | 1,157,934 |
| Revenue | 117,072,526 | 233,048,631 | 227,706,397 |
| Gross profit (loss) | 5,141,834 | (694,213) | 5,822,674 |
| General and administrative expenses | 9,230,550 | 8,611,850 | 7,591,279 |
| Interest and other income | 775,670 | 952,921 | 717,375 |
| EBITDA | (3,313,045) | (8,353,142) | (1,051,230) |
| Depreciation | 3,426,131 | 3,413,120 | 3,131,914 |
| EBIT | (6,739,178) | (11,766,262) | (4,183,144) |
| Interest on short-term debt | 3,613,941 | 2,660,732 | 1,168,519 |
| Interest on long-term debt | 480,502 | 470,959 | 642,748 |
| Unrealized gain (loss) on interest rate swaps | (194,901) | (88,361) | 315,430 |
| Plant and equipment impairment reversal | - | - | 4,500,000 |
| Income (loss) before income taxes | (11,028,522) | (14,986,314) | (1,178,981) |
| Provision for income taxes: | |||
| Current (recovery) | - | - | - |
| Deferred (recovery) | (3,132,314) | (4,883,038) | (126,780) |
| Total comprehensive income (loss) | (7,896,208) | (10,103,276) | (1,052,201) |
| Total comprehensive income (loss) per share | (2.41) | (3.08) | (0.32) |
| Total assets | 92,361,695 | 112,867,515 | 126,671,912 |
| Total long-term financial liabilities | 4,379,136 | 5,631,783 | 8,622,897 |
| Cash dividends declared per share | |||
| Class A | - | - | - |
| Class B | - | - | - |
Revenue from operations for the year ended October 31, 2024, was down 50% from the prior fiscal year. The primary drivers were decreased grain handling and alcohol sales.
39766279v2
NORTH WEST TERMINAL LTD.
Management's Discussion and Analysis
NWT
The Company had a gross profit of $5.1M (4.4% of total revenue) for the year ended October 31, 2024. This is an increase from the prior year when the company realized a gross loss of $0.7M or 0.3% of total revenue.
In order to mitigate interest rate risk, the Company had entered into interest rate swaps to fix a portion of the interest rate on the variable portion of the Company's loans. An asset of $50,254 has been recorded at the year ended October 31, 2024. As the Company does not use hedge accounting, the changes to the fair value of the swaps are recorded as an unrealized loss or gain in the period in which they occur.
3.2 Interest Expenses
| Interest Expense
For the period ended October 31 | 2024 | 2023 | 2022 |
| --- | --- | --- | --- |
| Interest on: | | | |
| Long-term debt | 480,502 | 470,959 | 642,748 |
| Short-term debt | 3,613,941 | 2,660,732 | 1,168,519 |
Long-term interest costs for the year ended October 31, 2024, were $480,502, which is slightly higher than the prior fiscal year. The increase is related to the interest on the long-term lease liability related to a locomotive that was leased early in the fiscal year as well as unrealized losses on interest rates swaps.
The Company has a working capital facility with Bank of Montreal with an authorized limit of $35M with an additional $13M on an as required basis to support the business. The Company continues to have the support of its lender and is currently working with Bank of Montreal to finalize a new credit amending agreement. This should enable the Company to finance inventory purchases for the Fermentation & Distillation Division through current available working capital. At the year ended October 31, 2024, the Company utilized this line of credit which resulted in short term interest expense of $3.6M and had drawn $41.2M against this facility. The Company also incurred an additional $1.0M in working capital access fees which are reported in general and administrative expenses.
3.3 Total Comprehensive Income (Loss) for the Year
The total comprehensive loss for the fiscal year ended October 31, 2024, was $7.9M or $2.41 per share. This is an improvement from the loss reported in the prior year when the Company reported a total comprehensive loss of $10.1M or $3.08 per share.
3.4 Summary of Quarterly Financial Information
| Selected Quarterly Financial Information
For the quarter ended | 2024 Q4 | 2024 Q3 | 2024 Q2 | 2024 Q1 | 2023 Q4 | 2023 Q3 | 2023 Q2 | 2023 Q1 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Total revenue | 19,258,934 | 27,139,387 | 31,569,054 | 39,105,151 | 34,587,558 | 40,270,981 | 93,564,468 | 64,625,624 |
| Total comprehensive income (loss) | (2,417,640) | (2,453,001) | (2,118,826) | (906,741) | (5,738,856) | (85,101) | (2,983,514) | (1,295,805) |
| Total comprehensive income (loss) per share | $(0.74) | $(0.75) | $(0.65) | $(0.28) | $(1.75) | $(0.03) | $(0.91) | $(0.40) |
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
Total revenue from operations for the fourth quarter ending October 31, 2024 was $19.2M compared to $34.6M in the prior year comparable quarter. The total comprehensive loss was $2.4M, an improvement from the loss of $5.7M reported in the prior year comparable quarter.
4. Liquidity and Capital Resources
4.1 Sources and Uses
4.1.1 Working Capital – Financial Information
Current assets at October 31, 2024, were $14.9M compared to $34.5M at October 31, 2023. This decrease is related to decreases in accounts receivable, inventories and risk management assets. These effects are directly related to the decrease in grain handling and the idling of the elevator during the year.
Current liabilities at October 31, 2024, are $54.6M compared to $66.0M at October 31, 2023. The decrease in current liabilities as at October 31, 2024, compared to the prior fiscal year is reflective of increases in bank indebtedness, offset by decreases in accounts payable and accrued liabilities, outstanding deferred cash tickets and grain storage liability.
The Company has a working capital deficiency and is undertaking steps to remedy. See section 6 for further details.
On September 18, 2024, the Company announced that it would be idling the grain elevator and suspending all purchases of grain from producers, as well as letting its Primary Elevator Licence expire. As such, at October 31, 2024, the Company did not have in place Canadian Grain Commission Trade Credit Insurance. At October 31, 2023, the Company had in place Canadian Grain Commission Trade Credit Insurance in the amount of $7M.
4.1.2 Cash Flow
Net cash flow used by continued operations was $3.7M during the year ended October 31, 2024 compared to cash used of $16.3M in the prior year. The Company used cash to satisfy the grain storage liability, outstanding deferred cash tickets and accounts payable and accrued liabilities. The Company generated cash by collecting accounts receivable and selling inventories.
4.1.3 Capital Requirements
The Company expended $950,410 (Grain Division - $224,878; Fermentation & Distillation Division - $725,532) on capital maintenance for the year ended October 31, 2024. During the previous year, a total of $1,359,995 (Grain Division - $333,016; Fermentation & Distillation Division - $1,026,939) was spent on the capital maintenance program. Capital maintenance costs include the completion of some major one-time repairs in both divisions. In addition, regular maintenance expenditures are done to sustain the life of the capital equipment and on-going costs for process improvements and efficiencies. Capital maintenance expenditures were financed through working capital.
The Company expects its capital requirements for capital maintenance for the upcoming year to remain largely unchanged from the current fiscal year ended October 31, 2024. The Company has a preventative maintenance program, as well as planned outages for the upcoming fiscal year that are not materially different from the fiscal year ended October 31, 2024.
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
4.2 Outstanding Share Data
The issued and outstanding shares of the Company as of February 11, 2025 are summarized in the following table:
| Class of Shares | Number of issued and outstanding Shares |
|---|---|
| Class A | 45,000 |
| Class B | 3,232,915 |
5. Outlook
Looking forward, shipments from the Company’s grain facilities are forecast to remain well below capacity for the 2024-25 fiscal year. As previously reported, the grain elevator near Unity, Saskatchewan was idled in September 2024 due to significant headwinds caused by new entrants in the market. Management expects the increased competition in the region to continue to put pressure on margins for the foreseeable future. The primary focus for the Company’s grain operations in the coming quarters will be the storage and handling of grain required for use in the fermentation and distillation facility as feedstock.
The Company initiated a strategic review process on August 16, 2023, to evaluate potential strategic alternatives available to it with a goal of determining what is in the best interests of the Company and all stakeholders. As mentioned, to assist in this process, and after thoroughly considering proposals from national firms, the Company engaged FTI Capital Advisors Canada, a Canadian accounting, tax and business consulting firm, as its strategic advisor. FTI Capital Advisors Canada has extensive experience in the agricultural industry, including in-depth knowledge of the Saskatchewan area.
Alcohol and DDGS shipment volumes from the fermentation and distillation facility are forecast to be close to the five-year average for all four quarters of the 2024-25 fiscal year. Moderately high feedstock prices and carbon taxes continue to put downward pressure on gross margins. Management expects feedstock prices to trend downward in the third and fourth quarters with wheat prices in general due to large world stocks overhanging grain markets. This could change up or down depending on the size of the 2025 harvest in the Company’s draw region. Operating margins will also continue to be under pressure for the remainder of the 2024-25 fiscal year because of excess capacity. The Company is limiting the production of renewable fuel due to low prices. This is leaving capacity underutilized as the Company develops new premium products and customers. Gross margins and operating margins are forecast to improve in the 2025-26 fiscal year as the Company continues to implement its longer-term strategy of expanding sales to higher-value specialty alcohol markets.
While management presents certain expectations regarding prices and market conditions as outlined above for the coming fiscal year, it is important to note that commodity prices in general are influenced by weather, geopolitical influences and the global economy and subject to considerable price volatility. For example, the Company anticipates shipments in excess of 30 per cent of its sales to be exported to the United States (US). The imposition of the 25 per cent Ad Valorem tariff, as threatened by the US, could have a material adverse effect on revenues for the 2024-25 fiscal year.
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
6. Capital Management
The Company’s primary objective when managing capital is to ensure that it has sufficient resources to maintain its ongoing operations. The Company considers short-term debt (net of cash), long-term debt (net of deferred financing charges), and total shareholders’ equity in the definition of capital.
The Company has a working capital deficiency of $39,668,024 and has incurred significant operating losses and negative cash flows from operations in recent quarters. Whether and when the Company can return to profitable levels and positive cash flows is uncertain due to continued pressures in the grain industry.
The continuation of the Company as a going concern is dependent on restructuring of the grain division in order to fund its operations. As mentioned, the Company has engaged FTI Capital Advisors, to assist in its strategic review, which includes exploring alternatives for a long-term financial restructuring. The strategic review is ongoing.
7. Financial Instruments & Risk Factors
7.1 Classification and fair value of financial instruments and inventories
The following methods and assumptions were used to estimate fair values of financial instruments and inventories:
Cash and accounts receivable are classified as financial instruments at amortized cost which approximates fair value. Bank indebtedness, accounts payable and accrued liabilities and long-term debt are classified as loans and borrowings and are initially recognized at fair value and subsequently carried at amortized cost which approximates fair value due to the short-term nature of the balances.
Long-term investments of privately held available for sale equity securities are classified as financial assets at fair value through other comprehensive income.
Risk management assets consist of exchange-traded derivatives. They are classified as financial assets at fair value through profit or loss.
Inventories, including grain inventories, are fair valued. Grain inventories include both commodity inventories and grain purchase and sales contracts which are forward derivatives. The grain purchase and sales contracts are classified as financial assets at fair value through profit or loss and the fair value for them and grain inventories are based on observable inputs other than quoted prices.
7.2 Risk Factors and Risk Management
The Company is exposed to a variety of financial and operational risks, which include weather risk, foreign exchange risk, interest rate risk, credit risk, commodity price risk, liquidity risk, rail performance risk, and regulatory risk affecting the Fermentation & Distillation Division.
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
7.2.1 Restructuring of Grain Division
There is no assurance that the Company will be able to identify and complete a transaction or restructure its finances on acceptable terms. The failure to complete a transaction or restructure its finances could have a materially adverse effect on the operations and financial results of the Company.
7.2.2 Weather Risk
The effects of weather conditions in a relatively confined geographic market area present a significant operating risk for the Company. Weather conditions can have a material (positive or negative) effect on grain handling volumes.
7.2.3 Foreign Exchange Risk
Foreign exchange risk is the risk that the value of the Canadian dollar will fluctuate in relation to other currency changes. Foreign exchange risk arises from both sale and purchase transactions, as well as recognized financial assets and liabilities denominated in foreign currencies.
7.2.4 Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company’s principal exposure to interest rate fluctuations is limited to its long-term debt and its working capital facility, which bears interest at both fixed and floating interest rates.
A 1% change in interest rates relating to the bank indebtedness and long-term debt of the Company would increase or decrease interest expense by approximately $427,951 (2023 - $346,061). Exposure to interest rate risk is managed through normal operating and financing activities.
7.2.5 Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The Company is exposed to credit risk in respect of accounts receivable as well as to risk if counterparties do not fulfill their contractual obligations.
In order to reduce the risk on its accounts receivable, the Company has adopted credit policies that include the regular review of accounts receivable and prepayment or deposit requirements with certain customers.
The Company’s maximum credit exposure at the balance sheet date consists primarily of the carrying amounts of accounts receivable as well as the fair value of commodity contracts.
7.2.6 Commodity Price Risk
Price risk is the risk that the value of inventory, related contracts and grain storage liability will fluctuate due to changes in market prices. A change in price or quality will have a direct effect on the value of inventory. As a grain handling facility, the Company has significant exposure to changes in various agriculture commodity prices. Prices for these commodities are volatile and are influenced by numerous factors beyond the Company’s control, such as supply and demand fundamentals as well as the weather.
39766279v2
NORTH WEST TERMINAL LTD.
Management's Discussion and Analysis
NWT
A substantial change in prices may affect the Company’s comprehensive income and operating cash flows, if not properly managed.
To help mitigate the risks associated with the fluctuations in the market price for agriculture commodities, the Company has a policy that grains be hedged, when possible, through the use of purchase and sales contracts. The Company may employ derivative commodity instruments (primarily futures and options) for the purpose of managing its exposure to commodity price risk. The Company’s actual exposure to these price risks is constantly changing as the Company’s inventories and commodity contracts change. The fair value of derivative contracts outstanding at October 31, 2024, resulted in the recognition of a risk management asset of $78,103 (2023 - $1,490,684).
7.2.7 Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Actual and forecasted cash flows are continuously monitored to reduce this liquidity risk. With the continued support of its lender, management judges the future cash flows of the Company as adequate to make payments as they become contractually due.
7.2.8 Rail Performance Risk
The provision of rail performance represents a significant operating risk to the Company. Shipping delays due to poor rail service will reduce overall grain shipments and may result in contract delay penalties and vessel demurrage charged to the Company. Poor rail performance could have a materially adverse effect on the grain operations and the financial results of the Company.
7.2.9 Risk Affecting the Fermentation & Distillation Division
7.2.9.1 Ethanol and Commodity Price Risk
The price of ethanol has a significant impact on the financial performance of the Fermentation & Distillation Division. Ethanol prices are largely a function of the wholesale price of gasoline and government incentives.
The grain feedstock, comprising the major portion of the production expenses of the Fermentation & Distillation Division, does not have any direct price relationship to the market price for renewable ethanol, but also can have a significant impact on the financial performance of the Fermentation & Distillation Division.
Falling ethanol prices and/or increasing feedstock costs could have a materially adverse effect on the Fermentation & Distillation Division and the financial results of the Company.
8. Other Matters
8.1 Related Party Transactions
The Company provides grain handling services to related parties including members of the Board of Directors. During the year, the Company purchased $16M of grain from related parties (2023 – $28M). These transactions are in the normal course of the Company’s operations at commercial rates and terms. During the year, directors were paid $15,000 of interest in relation to the April 2023 subordinated unsecured note offering.
39766279v2
NORTH WEST TERMINAL LTD.
Management's Discussion and Analysis
NWT
8.2 Alliance Grain Terminal Ltd.
The Company is a minority shareholder in Alliance Grain Terminal Ltd. which was successful in acquiring the former United Grain Growers Limited port terminal in Vancouver. The Company views this as a strategic investment in ensuring continued access to a vessel loading facility in the Port of Vancouver. This strategic investment is classified, for accounting purposes, as a financial instrument available for sale. Available for sale financial assets are measured at fair value with unrealized gains or losses recognized in other comprehensive income until the financial instrument is disposed of or impaired, at which time it is recognized in earnings.
8.3 Subsequent Events
In November 2024, the Company sold its shares in Alliance Seed Corp for $8.3K.
Use of Non-IFRS Terms and Reconciliation
The EBIDTA and EBIT data provided in this MD&A is intended to provide further insight with respect to the Company's financial results and to supplement its information on earnings (losses) as determined in accordance with IFRS. Such measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies.
| For the year ended October 31 | 2024 | 2023 | 2022 |
|---|---|---|---|
| Net income | (7,896,208) | (10,103,276) | (1,052,201) |
| Depreciation | 3,426,131 | 3,413,120 | 3,131,914 |
| Interest on short-term debt | 3,613,941 | 2,660,732 | 1,168,519 |
| Interest on long-term debt | 480,502 | 470,959 | 642,748 |
| Unrealized (gain)loss on interest rate swaps | 194,901 | 88,361 | (315,430) |
| Income taxes | (3,132,314) | (4,883,038) | (126,780) |
| Plant and equipment impairment reversal | - | - | (4,500,000) |
| EBITDA | (3,313,045) | (8,353,142) | (1,051,230) |
| Shares Outstanding | 3,277,915 | 3,277,915 | 3,277,915 |
| EBITDA per share | (2.41) | (3.08) | (0.32) |
Forward-looking Information
Certain statements in this report may constitute forward-looking statements. The results or events predicted in these statements may differ materially from actual results or events. These forward-looking statements can generally be identified by the use of statements that include phrases such as "believe", "expect", "anticipate", "intend", "plan", "likely", "will" or similar words or phrases. Similarly, statements that describe the Company's objectives, plans or goals are or may be forward-looking statements.
These forward-looking statements are based on the Company's current expectations and its projections about future events; however, whether actual results and developments will conform to the Company's
39766279v2
NORTH WEST TERMINAL LTD.
Management’s Discussion and Analysis
NWT
expectations and projections is subject to a number of risks and uncertainties, including, among other things, the risks and uncertainties associated with poor weather conditions, agricultural commodity prices, the prices of ethanol, gasoline and natural gas, financial leverage, additional funding requirements, international trade and political uncertainty, including the possibility of tariffs levied by the United States on Canada, competition, domestic regulation including tax incentives or mandated usage levels respecting ethanol, environmental risks, diseases and other livestock industry risks, acceptance of genetically modified products, labour disruptions, dependence on key personnel, the ability of the Company to successfully identify and complete a proposed sale of all or part of the elevator, technological advances, and credit and foreign exchange risk. These are not necessarily all of the important facts that could cause actual results to differ materially from those expressed in any of the Company’s forward-looking statements. Other known and unpredictable factors could also harm its results. Consequently, there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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