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Rapport annuel 2020

More united than ever.

 

What will tomorrow be made of?

Of hearts at work and moments shared together.

Of fields of expertise and fertile fields.

Of projects that bear fruit and flourishing regions.

Of healthy citizens and an enriching world.

 

Tomorrow will be made of us.

President's message

Sollio Cooperative Group’s past fiscal year was marked by exceptional turmoil resulting from the COVID-19 pandemic. Despite these difficult conditions, Sollio Cooperative Group once again showed that its cooperative identity is an asset to overcome obstacles and to continue positioning itself favourably for the future.

 

 

In 2020, Sollio Cooperative Group completed its ambitious growth strategy of the past few years and launched a new cycle for the next five years. Our new 2025 Strategic Plan is well rooted in our ambition, namely to ensure prosperity for our farming families and help our members feed the world.

 

The Vision 2020 network project is well underway and continues to advance. This year again, the network spared no effort, amid the pandemic, to pursue cooperative consolidation and forge new partnerships. Sollio Cooperative Group’s financial results demonstrate the resiliency of our teams and our network as well as our cooperative business model. Consolidated sales exceeded $8 billion with earnings before patronage refunds and income taxes reaching $201 million.

 

Note that we had to face one headwind after another during the past fiscal year. The harvest season was difficult across Eastern Canada.

 

The CN strike coincided with peak demand for propane, not to mention a railway blockade some months later. COVID-19 led to major changes in operations, plant closures, shutdown of construction sites, and disruptions of supply chains and markets.

 

The Port of Montréal strike caused many logistical challenges. Lastly, organizations across the world were hit by an unprecedented wave of hacking. The past year also brought some tailwinds. The hardware sector greatly benefited from the enthusiasm for renovations sparked by the lockdown.

 

Export markets for pork were robust, particularly the Chinese market. Above all, the severe strain on supply chains highlighted the importance of encouraging buying local and increasing food self-sufficiency while developing exports. Amid the pandemic, we worked relentlessly to keep supporting producers in their vital operations and serve our clients. We successfully adapted our operations for the benefit of local consumers and foreign markets.

 

This strong commitment and mobilization effort reflects the values that drive our network and which more than ever take on their full meaning: responsibility, solidarity, equity and honesty. All these efforts also enabled us to complete our ambitious growth plan. The integration of F. Ménard operations went smoothly. This acquisition enabled Olymel to maintain its position as one of the largest pork processing companies in North America.

 

Olymel also made a significant investment to expand its Saint-Damase poultry processing plant, allowing for the diversification of operations and activities, and the addition of new state-of-the-art facilities. Sollio Agriculture completed construction work on the grain terminal at the Port of Québec City, providing agricultural producers access to the international grain export market. Lastly, the recent partnerships with BMR Group in growing market segments are generating the expected results.

 

 

Solidarity is the very foundation of our network and all our actions. By considering both the needs and the contribution of each individual, solidarity strengthens value chains.

 

 

Our growth would not have been possible without the support of financial institutions. This year again, our financial partners provided backing for us by investing in preferred shares and renewing our credit facility. We would like to thank our financial partners for their strong vote of confidence in our organization and the cooperative business model.

 


On behalf of the Board of Directors, I extend my thanks to Gaétan Desroches, Réjean Nadeau, Sébastien Léveillé, Pascal Houle and their respective teams for their determination and efforts to successfully carry out numerous projects and for having effectively weathered the storms of the past year.

 

My thanks also go out to our some 16,000 employees who contributed to these results, while adapting to the many work, social and personal constraints caused by COVID-19.

 
More united than ever

 

Solidarity is the very foundation of our network and all our actions. By considering both the needs and the contribution of each individual, solidarity strengthens value chains. Solidarity is a fundamental value of the cooperative model.

 

The various hardships we endured this year have clearly demonstrated network solidarity, among other things, through its commitment to the community.

 

The launch of the From Us to You initiative along with 17 network cooperatives is one example. Under this initiative, food was donated and financial support was provided to organizations that help people in need throughout Québec and eastern Ontario.

 

Regarding our operations, solidarity allowed us to continue the network consolidation project, and important milestones were reached: the creation of Agiska Coopérative was authorized by the Competition Bureau, Covris Coopérative came officially into existence, and La Coop Alliance merged with Avantis Coopérative.

 

The establishment of new partnerships also reached significant milestones. Joint venture Sollio & Avantis Agriculture coopérative was officially launched, making it the second partnership between a consolidated cooperative and Sollio Agriculture.

 

The creation of a partnership in grain marketing, namely Sollio & Grains Québec Agriculture coopérative, will make it possible to offer better marketing conditions to producers and better meet processors’ needs. Discussions are underway with Uniag Coopérative for setting up partnerships tailored to their regional conditions.

 

This impetus towards solidarity was also observed across the bio-food sector. Together, organizations in the value chain were able to find solutions and implement measures to deal with unprecedented logistical and market shocks.

 

I must also acknowledge the solidarity shown by governments and their proactive role, their support, close collaboration of public health agencies as well as the unifying role of the federal and provincial ministers of agriculture, the Honourable Marie-Claude Bibeau and André Lamontagne.

 

With all these actions of solidarity, the bio-food sector was able to carry on its activities in an orderly fashion amid the pandemic and to continue feeding the  population.

 

While our agriculture sector continues to undergo a multitude of changes and adaptations, one unwavering constant is that our producers are at the heart of Sollio Cooperative Group.

 

Together, let’s set the table for tomorrow

 

Over its near 100 years of history, Sollio Cooperative Group has achieved many successes and overcome numerous crises. History is a testament to our resilience. While our agriculture sector continues to undergo a multitude of changes and adaptations, one unwavering constant is that our producers are at the heart of Sollio Cooperative Group.

 

Our new 2025 Strategic Plan, which sets up the launch for tomorrow’s agriculture, is in line with this thinking. Our 2025 Strategic Plan aims to ensure our growth actions are coherent and our three divisions generate synergy. It’s a deep rethinking of our growth strategies, financial models and governance while considering issues involving sustainable development, development of talent and the next generation, and our brand image.

 

To carry out this important project, the Board of Directors and the Chief Executive Officer announced the creation of a new position of Chief Operating Officer at the parent company, in line with the succession plan.

 

Following a rigorous selection process, Pascal Houle, Executive Vice-President and Chief Executive Officer, BMR Group, will be appointed to this position. We are convinced he will fully leverage his skills in this new role.

 

We also updated our vision and mission for 2025. While the new vision strengthens our role as a benchmark player both nationally and internationally, our new mission is tailored to the realities of today’s society by incorporating the concepts of prosperity and sustainability.

 

Moreover, the 2025 Strategic Plan integrates six of the United Nation’s sustainable development goals, namely the fight against climate change, decent work and economic growth, zero hunger, good health and well-being, clean water and sanitation, and responsible consumption and production. Together, we must continue to seek solutions to the different environmental and social challenges.

 

That is why Sollio Cooperative Group has formally adhered to these goals. A structured approach to corporate responsibility is under development to give concrete impetus to this commitment.

 

The 2025 Strategic Plan also aims to ensure that Sollio Cooperative Group plays a relevant and evolving umbrella role that considers new realities through different perspectives, including future governance of Sollio Cooperative Group. Regarding governance, several analyses are underway. These include implementing a succession strategy for the Board of Directors, and its representation and composition.

 

We also adopted this year an Action plan for the equitable representation of women in network governance and a cooperative governance training program for directors. We hope to roll out this action plan with the network’s cooperatives over the next few years.

 

Over the past few months, we have had the opportunity to share with various organizations, partners and government authorities our vision for post-COVID economic recovery, which incorporates several elements of the 2025 Strategic Plan.

 

In our view, the agri-food sector’s economic recovery has to be driven by five main initiatives: increasing productivity, promoting food self-sufficiency and exports, developing regional vitality, fighting climate change, and enhancing the value of front-line jobs.

 

We have adopted an Action plan for the equitable representation of women in network governance and a cooperative governance training program for directors.
 

Along with these projects, our cooperative model will continue to evolve in certain areas as we expand into new regions and sectors. The Board of Directors has authorized the creation of a new section, namely the Western Hog section.

 

This was inspired by the successes of the Cooperative Pork Chain in Québec, but with different specifications and products, to factor in specific regional realities. Also, more independent BMR stores became affiliated with Sollio Cooperative Group.

 

This section now has over 70 members that adhere to our cooperative model and which benefit from its advantages. To conclude, I would like to extend my thanks to my colleagues on the Board of Directors for their vision and energy, and their trust in me. And I applaud all of the directors across the network. It is your commitment and determination that give real meaning to our collective action!

Highlights

8,1 G
$

Revenues

7,7 M
$

Dividends paid to the Cooperative Pork Chain

661,2 M
$

Working capital

201 M
$

Earnings before patronage refunds and income taxes

2 G
$

Preferred shares and Sollio's Group equity

29,2 M
$

Patronage refunds

Management discussion and analysis

Sollio Cooperative Group retrospective for 2019-2020.

In a year that will forever be remembered as one of the most tumultuous in the history of the modern economy, Sollio Cooperative Group continued to grow by surpassing $8 billion in sales. A performance that showcases the effectiveness and resiliency of our cooperative business model.

 

Sollio Cooperative Group generated $8.152 billion in sales and $201.0 million in earnings before patronage refunds and income taxes for the fiscal year ended October 31, 2020, compared with $7.282 billion and $79.4 million, respectively, for fiscal 2019. Growth was driven primarily by the Food Division (Olymel L.P.).

 

Our Food Division

 

For the Food Division, fiscal 2020 was highlighted by several important factors. Earnings before patronage refunds and income taxes totalled $234.1 million, up significantly from $72.3 million in fiscal 2019. The increase stemmed primarily from a recent acquisition in the Eastern fresh pork sector combined with higher meat margins in the fresh pork sectors.

 

The reopening of the Chinese market in 2020 and strong demand from China contributed to the increase in margins. Note that the strong demand from China for fresh pork rose following an outbreak of African swine fever that decimated a significant portion of the Chinese herd. Yet, the Food Division was badly affected by the COVID-19 pandemic, particularly with the temporary closure or slowdown in operations of certain plants, as well as the shutdown of the hotel, restaurant and institutional sectors, which have reduced the demand for processed products.

 

This extraordinary situation compounded by a railway blockade and strikes at the Port of Montréal and at one of the Division’s plants partly offset the significant results of the fresh pork sector. Nonetheless, the Food Division reported $613.3 million growth in sales, driven in particular by a completed acquisition, higher selling prices at the beginning of the fiscal year and greater volumes in the fresh pork sector. The increases were however partly offset by the negative impacts of COVID-19.

 

Our Agriculture Division

 

The Agriculture Division (Sollio Agriculture) reported earnings before patronage refunds and income taxes of $8.2 million, compared with $39.0 million in fiscal 2019.

 

The decrease resulted mainly from unfavourable results in the grains sector, which was affected by several factors. Firstly, the disappointing corn harvest in 2019 negatively impacted the trade balance by preventing exports in the spring of 2020. COVID-19 led to a significant drop in ethanol demand, resulting in lower demand for corn and significantly impacting the sector profitability.

 

Lastly, soybean marketing was badly affected by the geopolitical situation, with negative impacts on exports. That being said, the Agriculture Division’s external sales were up $45.0 million from last year, due primarily to a business acquisition made during the fiscal year.

 

From the beginning of the first wave of the COVID-19 pandemic in March, we took the actions required to ensure our shared priority of feeding our communities.

 

Our Retail Division

 

The Retail Division (BMR Group) posted earnings before taxes, including corporate expenses, of approximately $28.7 million, an improvement of 29.7 million over the last fiscal year. This result was driven largely by the $211.2 million increase in aggregate sales in fiscal 2020.

 

The lockdown and border closures following the COVID-19 pandemic affected Quebecers’ consumption habits, giving rise to attractive opportunities for the Division. These changes in habits translated into higher sales and margins.

 

The higher margins stemmed from increased prices for forest materials, influenced by the pandemic’s impacts. Lastly, the acquisition of a business operating in the distribution and marketing of construction materials in September 2019 made an additional significant contribution to sales and earnings.

 
Energy sector

 

Energy sector results are reported as a share of results of a joint arrangement owing to a 50% interest held via a subsidiary, Énergies SonGo inc. The share recorded for fiscal 2020 amounted to $13.9 million compared with $9.5 million in fiscal 2019.

 

Operating expenses

 

Cost of sales and selling and administrative expenses totalled $7.914 billion compared with $7.183 billion for the previous year. The increase was mainly attributable to the Food Division. Net financial expenses increased to $59.3 million in fiscal 2020 from $51.5 million for the previous fiscal year, owing primarily to the $287.0 million increase in the average long-term debt compared with fiscal 2019. Including the results of its divisions, Sollio Cooperative Group reported consolidated operating income of $178.8 million, compared with $48.1 million in fiscal 2019.

 

The other income and expenses included the share of results of joint arrangements, namely businesses in which Sollio Cooperative Group has joint control. This share totalled $50.7 million in fiscal 2020 compared with $34.9 million for fiscal 2019.

 

The increase was driven primarily by the Food Division’s animal production and processing sector following a significant loss recorded in 2019 and, to a lesser extent, the improved results attributable to the energy and crop production sectors.

 

The share of results of entities subject to significant influence – entities in which Sollio Cooperative Group has an investment of less than 50% – amounted to $4.7 million in 2020, compared with a loss of $2.5 million in 2019 that resulted primarily from the decision to discontinue the project to build an integrated urea and methanol plant. Investment income, which represents interest and dividend income from investments, totalled $3.1 million in fiscal 2020 compared with $2.2 million for the prior fiscal year.

 

Net losses on disposal and remeasurement of assets amounted to $1.2 million in fiscal 2020 compared with $3.3 million in fiscal 2019. The 2020 loss stemmed primarily from the sale of units held in subsidiaries and joint arrangements of the Agricultural Division, offset by gains on disposals of property, plant and equipment. The 2019 loss resulted from the remeasurement of a note receivable in the energy sector, partly offset by gains on the disposal of property, plant and equipment, particularly a gain from the sale of the building housing the head office and a gain on the acquisition of assets of an Agriculture Division business.

 

For the year ended October 31, 2020, after deducting $29.2 million in declared patronage refunds and $30.9 million in income taxes, the Group reported net earnings of $141.0 million compared with $48.6 million in fiscal 2019. Net earnings attributable to members of the Group and included in the reserve amounted to $117.7 million, compared with $38.4 million in fiscal 2019, while net earnings attributable to non-controlling interests totalled $23.3 million, compared with $10.2 million in fiscal 2019.

 

 

Our business model is clearly resilient as it relies on a robust culture of cooperation, collaboration and transparency.

 

In light of fiscal 2020 results, the Board of Directors resolved on January 18, 2021, to pay a $7.7 million dividend to holders of shares in the Cooperative Pork Chain.

 

Parent company

 

The parent company’s net expenses increased to $81.1 million from $9.0 million for the previous fiscal year, owing in part to the purchase of annuities for certain defined benefit pension plans combined with the unfavourable return on actuarial assets. In addition, a loss on remeasurement of interest rate swaps was recorded following a sharp drop in interest rates resulting from the COVID-19 pandemic.

 

Fiscal 2020 also saw investors confirming their trust in the organization. More than $450 million has been invested since October 2019 to finance acquisition projects and additions to property, plant and equipment. With these investments, we can accelerate our optimization project by promoting digitization and innovation, continue to position ourselves as a leader in the agri-food and retail sectors in both Québec and Canada, and mitigate the impacts of the COVID-19 pandemic on our growth plans.

 

A year of turbulence and resilience

 

Fiscal 2020 can be characterized as an exceptional year in terms of events, achievements and results. COVID-19 created great uncertainty not only for many of our members, our personnel, our organization, our divisions and our network of cooperatives but also across our business environment.

 

From the farm to the table, every link in the agri-food and retail supply chain was put under enormous pressure and we had to quickly adapt our ways of doing things to deal with the new reality. Our business model is clearly resilient as it relies on a robust culture of cooperation, collaboration and transparency, a sustainable value creation model, and meets growth objectives and future challenges with a long-term vision.

 

All of which greatly helps us to navigate through turbulent times. From the beginning of the first wave of the COVID-19 pandemic in March, we took the actions required to ensure our shared priority of feeding our communities by adapting to prevent and mitigate the pandemic’s impacts.

 

Leveraging our past experience and complying with public health guidelines, we adopted measures to keep our staff, clients and suppliers safe, and ensure business continuity. As a provider of essential services, we kept in mind our responsibility as a major player in the agri-food value chain.

 

Human resources

 

Human resources play a key role in Sollio Cooperative Group’s successes as eloquently demonstrated more than ever during the extraordinary year that just ended. As elsewhere, our ways of doing things were transformed overnight. By setting out a new vision of remote work, Sollio Cooperative Group has reinvented itself to better respond to employee needs and optimize the digital shift underway.

 

 

Talent and Culture project

 

In line with our new strategic plan, Echo vision and leadership, a development program for our leaders was launched in fall 2020. It brings together all the members of management committees of our divisions and those of the parent company. It’s a unique experience designed to foster cross-disciplinary collaboration to better understand our professional ecosystem and inspire reflection and action. This year again, Sollio Cooperative Group made the list of Montréal’s Top Employers. This competition, an initiative of Canada’s Top 100 Employers, recognizes the employers in Greater Montréal for their exceptional workplaces and practices.

 

Health and well-being

 

Overall health is a genuine concern for our employees. A financially, physically and psychologically healthy workforce provides remarkable benefits, in terms of both productivity and mobilization.

 

To that end, several actions were taken during the year, including telemedicine, production of mental health capsules for the entire network, development of an internal volunteer program and relaunch of the Employee Assistance Program. In terms of collaboration with the network, a complete overhaul of the Mutuelle de prévention's policies was carried out during the year.

 
Looking to the future

 

Sollio Cooperative Group is currently experiencing strong growth in its business, which creates great opportunities as well as numerous challenges. Growth gives rise to an essential need for consolidation to allow our organization to seamlessly integrate the investments made and generate maximum synergy. I would like to acknowledge the effort, ingenuity and cooperation of all those involved in developing our 2020-2025 strategic plan. We adopted an innovative approach by focusing on two axes, namely business and the federation, as well as nine strategic orientations.

 

The alignment of each division’s plans and the parent company’s umbrella role will promote coherent actions, optimizing their effectiveness and ultimately, the benefits to the entire Sollio Cooperative Group. Under Vision 2020, which will now be called Vision plus, our teams worked tirelessly to support cooperatives, particularly in managing and implementing projects, negotiating and drafting contracts, hiring senior executives and defining organizational structures, and providing consulting services in communications and branding development.

 

We are very proud of Vision 2020 since it will have laid the foundations for the modernization and transformation of the network business model, in response to market consolidation and member concerns. During the past fiscal year, we also made sure to respond adequately to our members’ request to play a more active role with respect to government authorities, our stakeholders and in the public arena. In addition to our From Us to You initiative, we carried out a communication campaign entitled Together, let’s set the table for tomorrow; introduced a new policy on donations and sponsorships; worked on the renewal of the tax-deferred share program; and submitted our economic recovery plan for the agri-food sector.

 

These initiatives help Sollio Cooperative Group to pursue its societal role and mission with greater focus. Lastly, our new name became a reality during the past year. Canada’s largest agricultural cooperative with deep roots in Québec took on a new identity that corresponds to its scope and ambition, strengthens our feeling of belonging and the cooperative model’s relevance. For Sollio Cooperative Group, its growth and expansion in the Canadian, U.S. and global markets is more than ever a priority. A new name. A new us.

 

To conclude, the Executive Committee and I would like to extend a thank you to all the members of the Board of Directors and the President Ghislain Gervais for their support and advice. We are grateful for your unwavering commitment and involvement during the past fiscal year. We wish to thank all the presidents and general managers of the affiliated cooperatives for their collaboration during this year full of upheavals. I am indebted to all of our organization’s personnel and Executive Committee members for meeting the challenges of the past year. I also thank the management teams of our divisions as well as all our employees for their commitment and dedication. Despite COVID-19, many of you served on the front line day after day to continue feeding the world and maintaining our essential services. I’m very grateful to you. In closing, I would like to congratulate Pascal Houle who, following a rigorous selection process, has been appointed as Chief Operating Officer of Sollio Cooperative Group.

 

This appointment, which stems from our senior management succession plan, demonstrates the talent and excellence within our organization. The CEOs of Sollio Agriculture and BMR Group will report directly to him. Mr. Houle takes up his duties the day after the Annual General Meeting. 

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Sollio Agriculture

Sollio Agriculture retrospective for 2019-2020

Sollio Agriculture generated net sales of $2.761 billion for fiscal 2020 compared with $2.604 billion for the previous fiscal year.

 

The $157 million increase was driven primarily by the addition of the agricultural business of F. Ménard, now Entreprise AMQ S.E.C., acquired in early 2020. The acquisition largely contributed to the animal production sector’s continued growth.

 

The increase also resulted from higher feed volumes in the hog, dairy and other ruminant sectors, plus the effect of the $15 per tonne rise in the average price of ingredients. Net sales in the crop production sector were down 4%, in line with expectations.

 

The overall EBITDA contribution was 3.4% higher than in the previous fiscal year. Fertilizer sales volumes remained stable across our networks, as did crop protection sales. However, growth continued in organic crop protection inputs, with an increase of more than 18% in 2020, enabling us to top $5 million in sales.

 

In the seed sector, Semences Elite’s portfolio of corn and soybeans was integrated into Maizex Seeds Inc. Sales in the grain sector declined by 6% in the past year. Regarding operations, the unfavourable consolidated results stemmed mainly from a significantly lower than expected volume (24%) attributable to the 2019 harvest conditions, the geopolitical conflict with China and the COVID-19 crisis.

 

However, the results also include a $7.34 million accounting adjustment in respect of the allocation of purchase price paid for our acquisitions in Ontario to rectify incorrect accounting charges to the 2019 results.

 

The COVID-19 pandemic impacted the organization in many ways. Certain animal production sectors were affected negatively: dairy, with lower demand and a 2% reduction in the right to produce, and poultry, with cuts in quotas for three periods. However, the hog sector has been fairly stable.

 

 

At the end of this particularly eventful year, we must highlight the exceptional commitment of our operational teams and teleworking employees who worked tirelessly to “hold down the fort.”

 

In crop production, pressure increased on the supply chain to ensure input availability as retailers and farmers procured their products faster than usual. These premature purchases, combined with an early spring season, resulted in increased handling and distribution costs on fertilizer products that slightly affected results. In the grains sector, the expected price increase in the corn base did not materialize when the demand for ethanol disappeared at the end of March at the start of the pandemic.

 

However, the price decline favoured exports to Europe. The lower administrative costs due to the travel ban did not offset the loss of revenue and additional expenses related to the pandemic.

 

A $6 million cost reduction program implemented in spring amid the initial effects of COVID-19 led to a decrease in administrative overheads in the sectors and cross-sector services.

 

At the end of this particularly eventful year, we must highlight the exceptional commitment of our operational teams and teleworking employees who worked tirelessly to “hold down the fort.” The past year also saw Sollio Agriculture’s agricultural partnership projects moving forward with the creation of Sollio & Avantis Agriculture coopérative and the launch of the first provincial partnership Sollio & Grains Québec Agriculture coopérative with several cooperatives involved in the grain sector.

 

In its second year of operations, Sollio & Vivaco Agriculture coopérative continued its momentum with results in line with the budget and in particular strong growth in the animal feed sector.

 

Our export activities gained momentum, with the loading facilities at our new grain export terminal in Québec City operational since the fall of 2019 and the commissioning of new equipment to unload trucks, trains and ships at the end of 2020. Supplies are sourced mainly from our Oshawa terminal where 82,000 tonnes of grain were loaded during its first season of operations.

 

In animal production, the integration of Entreprise AMQ S.E.C. proved to be a success and the expected gains have already materialized. We met our commitment to customers and employees to maintain F. Ménard’s successful business model, contributing to a customer retention rate approaching 100%.

 

Lastly, Sollio Agriculture finalized its 2020-2025 Strategic Plan where operational efficiency takes top priority for the next two years. This optimization will be the key to success for continuing integration of the acquisitions of recent years and for ensuring a sustainable future for the organization. This fiscal year will serve as the foundation for the upturn in growth expected at the end of this plan, in keeping with the aim of bolstering agricultural producers’ prosperity.

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Olymel

Olymel retrospective for 2019-2020.

In fiscal 2020, despite the unprecedented disruptions, Olymel’s sales grew by $613 million or 16.4% to $4.35 billion.

 

This excellent performance, under difficult circumstances, was driven primarily by a rebound in the Chinese market early in the fiscal year coupled with the integration of the F. Ménard operations, acquired by Olymel in January 2020. Similarly to other businesses across the world, Olymel was badly affected by the COVID-19 pandemic’s impacts.

 

The turmoil in the markets weighed heavily on operations and results in certain sectors, particularly the processed products sector. Starting in March 2020, Olymel fully mobilized to prevent the virus from spreading by implementing strong health measures to protect its employees’ health. Despite these measures and close collaboration with public health services across Canada, Olymel had to shut down, as a precautionary measure, its hog slaughtering and pork cutting plant in Yamachiche for a period of two weeks at the end of March.

 

For as long as public authorities deem necessary, and regardless of the costs, Olymel will maintain the health measures in place and continue to adapt its activities to the constraints of this pandemic.

 

For the past fiscal year, the financial impact of the measures implemented amounted to $28.9 million. Olymel had to deal with other disruptions in fiscal 2020, including an eight-week strike at the Princeville hog slaughtering and pork cutting plant, a railway blockade in February, a longshoremen’s strike at the Port of Montréal in August, and lastly, an IT incident on October 5, 2020. In addition to the pandemic, all these disruptions gave rise to major logistical and operational challenges, but Olymel clearly demonstrated its ability to weather the storms.

 

Hog production

 

Following a loss in the previous fiscal year, the Eastern hog production sector reported a gain in fiscal 2020. The improvement in results was largely attributable to hedging transactions on hog prices and currencies.

 

The preparatory work for building a fifth collective swine nursery at Fermes Boréales in Témiscamingue was launched during the fiscal year. This new facility will round off Phase 1 of the project that produced 252,000 piglets in fiscal 2020. The Western hog production sector recorded a loss in fiscal 2020, but well below that reported in the previous fiscal year.

 

As in the Eastern hog production sector, the primary reason for the improvement was the gains generated from hedging operations. In fiscal 2020, the Western hog production sector produced over 1.3 million hogs.

 

Work on the gradual installation of open stalls in farms also continued. Olymel and Sollio Agriculture teams moved forward to create a Western hog section based on the Cooperative Pork Chain model but adapted to Western realities. This new section is expected to be launched in spring 2021. Lastly, in both the East and the West, Olymel put much effort into preventing African swine fever and developing an internal contingency plan.

 

 

Eastern fresh Pork

 

The Eastern fresh pork sector reported positive results for fiscal 2020, up sharply from the previous fiscal year. This performance was largely attributable to the reopening and strength of the Chinese market and the acquisition of F. Ménard. That being said, the eight-week strike at the Princeville plant at the beginning of fiscal 2020 and the COVID-19 pandemic during most of the fiscal year had a negative impact on our operations.

 

The number of pigs awaiting slaughter increased while value added production declined to the benefit of slaughtering operations. The strike and the pandemic caused a slight decline in slaughter volume.

 

Between March and October 2020, pandemic-induced slowdowns forced Olymel to send tens of thousands of hogs from Ontario to its Red Deer slaughterhouse in Alberta and nearly 200,000 hogs to other slaughterhouses in the U.S. and Canada. Additional unplanned and significant costs were incurred as a result.

 

In addition, the Saint-Esprit, Vallée-Jonction and Princeville slaughtering plants had their exports permits to China withdrawn temporarily following COVID-19 outbreaks at different points in time. Despite a difficult business environment, the reopening of the Chinese market in November 2019 enabled Olymel to more than double its pork exports to China.

 

Notwithstanding sporadic slowdowns, sales of chilled pork products to Japan were slightly up. In January 2020, Olymel began the seamless integration of F. Ménard’s pork production, processing and further processing operations. The project to set up a second shift at the Ange-Gardien slaughtering and cutting plant in 2021 should significantly increase its production capacity.

 

Western fresh Pork

 

Results of the Western fresh pork sector were slightly down in fiscal 2020 compared with fiscal 2019. As in the East, the Western fresh pork sector had to put in place significant health measures to prevent the coronavirus from spreading. The Red Deer plant opened up a second shift for both slaughtering and cutting. Nonetheless, although the Chinese market reopened, the Red Deer plant’s licence to export to China remained suspended, since April 28, 2019.

 

Further processed Pork

 

Lower volumes in this sector stemmed in large part from COVID-19’s impacts on further processed pork products. This impact was mostly felt in the hotel, restaurant and institutional (HRI) sector, where demand for various fresh sausage and ham products declined significantly during the first lockdown. Sudden changes in production volumes and labour management have been ongoing challenges since the early days of the pandemic. Under the circumstances, investment projects were postponed.

 

Bacon Sector

 

Despite lower sales volumes, the bacon sector generated positive results, driven by higher selling prices and improved returns. Sliced bacon, particularly bulk sales, as well as pre-cooked bacon were particularly affected by the decline in sales resulting from the pandemic.

 

Fresh Poultry

 

The fresh poultry sector was hard hit by the negative impacts of COIVD-19. The shutdown of restaurants led to a decline in both volumes and selling prices. Faced with complete disruption of this market, poultry farmers were forced to scale back their production for several months. For the first time in five years, Canadian chicken production declined, owing to the pandemic.

 

Notwithstanding, in September 2020, Olymel announced a $35 million investment in its poultry slaughtering and cutting plant in Saint-Damase, Montérégie, mainly to equip the plant with additional cutting, deboning and tray packing lines, and new high-capacity, state-of-the-art facilities. Olymel’s interests in Sunnymel, New Brunswick and in Volaille Giannone, Québec generated positive contributions to fiscal 2020 results, although to a lesser extent than in the previous year.

 

Further processed Poultry

 

Although sales volumes declined, the further processed poultry sector generated positive results compared with a loss in the previous fiscal year. The improved results stemmed from higher selling prices coupled with lower raw material prices.

 

The decline in sales volumes was entirely attributable to the negative impacts of COVID-19. The shutdown of the HRI sector, particularly restaurants, triggered a sharp drop in sales, mostly at food wholesalers but also for retailers. Drive-through orders and mobile delivery applications partly offset these volume declines. The lower demand impacted operations and resulted in temporary closures, slowdowns and production reorganization at several poultry further processing plants.

 

The integration of Pinty’s operations in Ontario was also actively pursued in 2020. Some operations were transferred from Port Colborne to two Olymel further processing plants in Brampton. The installation of a second roasting line at the Paris, Ontario plant in 2020 will improve the distribution of production across the cooking plants.

 

In fiscal 2020, the turkey sector posted a lower loss than in the previous fiscal year, due to the improved meat margin. While Olymel has now enhanced its offering by marketing bagged seasoned turkeys, the disappointing results in this sector confirm an ongoing trend of the past few years. This situation is not limited to Olymel. Between 2017 and 2019 alone, Canadian processors suffered losses of $120 million, according to a PwC study. The COVID-19 pandemic, labour shortages, and poultry quality issues were all factors that contributed to these negative results.

 

Resilience – A condition for growth

 

The year 2020 will be unforgettable. If there is one word to describe how Olymel weathered the many turbulences of this difficult period, it would be resilience. I would like to express my gratitude to all of our personnel. Our employees complied with stringent health measures and adapted to a working environment that was not always predictable.

 

I thank them while pointing out that our results are a reflection of their commitment. In November 2021, we will be celebrating the Olymel’s 30th founding anniversary.

 

As we embark on our fourth decade, we remain focused on our values of integrity, trust and respect. Lastly, even more so than in the past, I would like to warmly thank all of my colleagues in the Corporate Governance Committee for the work accomplished under exceptional conditions. Before concluding, I wish to extend my sincere thanks to Gaétan Desroches, Chief Executive Officer of Sollio Cooperative Group, for his transparent collaboration during this fiscal year. I’m also deeply grateful to our President Ghislain Gervais and all the members of the Board of Directors for their support and invaluable advice.

 

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BMR Group

BMR Group retrospective for 2019-2020

Despite the challenges and uncertainty that marked fiscal 2020, we can look back at a highly successful period.

 

Our financial results exceeded expectations with BMR Group sales reaching $1.159 billion, compared with $948 million for the previous fiscal year. As a result, the Group recorded exceptional growth for the year!

 

A year of challenges as well as opportunities

 

Combined with the closing of borders, the lockdown had a significant impact on consumption habits, leading to strong growth in the renovation market during the year. Our network was ready to handle this growth, stemming in particular from the omnichannel strategy rollout begun this year, which allows customers to place orders via the bmr.co website and pick them up in store, as well as to the new telephone order service introduced in stores at the beginning of the crisis.

 

With more than 10,000 orders received between April and October, this initiative contributed significantly to our good results. Online sales grew during the year, but BMR was able to meet the demand. From the beginning of the pandemic, already initiated digital projects were accelerated while BMR’s web offering was enhanced, resulting in exceptional growth for our online sales.

 

The pandemic also forced us to demonstrate audacity and creativity and transform BMR Group’s traditional Salon d’achats into a 100% virtual event. The new formula was a success, generating sharply higher sales than in the previous fiscal year. Amid the pandemic, protecting the physical and psychological health of our employees, our merchants and all BMR network members was a clear priority. It was also important to guide them through this turbulent period and ensure they remained motivated. A number of initiatives have been put in place in this regard, including operational management, communications to employees and proactive support for retailers.

 

From the beginning of the pandemic, already initiated digital projects were accelerated while BMR’s web offering was enhanced, resulting in exceptional growth for our online sales.

 

Manage urgent issues without losing sight of our vision

 

While the COVID-19 pandemic and the implemented measures are certainly central to our assessment of this exceptional year, several other achievements contributed to making fiscal 2020 a positive year for BMR Group. One such achievement is no doubt the development of the 2020-2025 Strategic Plan, which will continue to drive BMR’s growth across Canada.

 

This plan aims to make BMR Group “the emerging benchmark in Canada for entrepreneurs and consumers, recognized for its retailers’ expertise, its quality customer experience and relevant product offering”. The year 2020 was also marked by the programming and development of the brand new Enterprise Resource Planning (ERP) system, a crucial strategic milestone in the impressive digital transformation launched three years ago. BMR is now equipped with a high-performance system providing it with greater efficiency in managing its activities, a better overview of the organization’s business, all while adapting to the uniqueness of each retailer.

 

Another noteworthy milestone was the completion of Lefebvre & Benoit’s first year of operations within BMR on September 1, 2020. The addition of this division, operating in a complementary sector and perfectly illustrating BMR Group’s vision of bold and innovative growth, was a resounding success. The financial results are on track, despite the temporary closure of projects in spring 2020. To sum up, the conditions under which we operated in fiscal 2020 were highly favourable in several respects.

 

But what allowed us to surpass our business objectives was the prudence that guided our daily actions, as well as the agility and courage shown by our retailers, our employees and our entire network to adapt and transform obstacles into opportunities. I would like to thank them for being such a great source of motivation, which keeps pushing us to exceed ourselves. It’s with this frame of mind we are entering the upcoming year, which will be marked by our digital shift and during which our network growth and business process optimization will play at the core of our actions. And I know that to achieve its most ambitious objectives, BMR can once again rely on its employees, retailers as well Sollio Cooperative Group and all our partners.

COOPERATIVE OVERVIEW

Our cooperative heritage

We are proud of our cooperative heritage. Deeply rooted across Canada, Sollio Cooperative Group has evolved seamlessly with a focus on member services and helping to build community. That is why we are committed to protecting and enhancing the cooperative identity of our organization. Our approach is straightforward and based on the seven internationally
recognized cooperative principles.

Cooperatives become members of Sollio Cooperative Group on a voluntary basis and work with us to form the greater federated network of agricultural cooperatives.

At year-end, Sollio Cooperative Group members included 25 traditional agricultural cooperatives, 23 consumer cooperatives and two sections as regular members, and 43 agricultural equipment cooperatives (“CUMA”) as auxiliary members.

The two sections correspond to a group of hog producers that supply Olymel and a group of 69 independent BMR hardware stores.

The network’s cooperatives comprised more than 120,000 voluntary members.

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Moreover, Sollio Cooperative Group adopted an Action plan for the equitable representation of women in network governance this year, with the aim of matching female representation in governance with the percentage of women members, which is about 30%.

16

members make up the board of directors, including two women (12%).

1
seat

is reserved for women.

1
seat

is reserved for special purpose or consumer cooperatives.

1
seat

is reserved for an external director (non-voting).

390

directors

87

of whom are women, i.e., 22%, sit on the boards of directors of affiliated cooperatives. That said, female representation is only 16% on the boards of directors of agricultural cooperatives.

53

young people (under 35 years old) serve on boards of directors.

123 250

Members, agricultural producers and consumers

53 835

regular members, including 17,946 agricultural producers

69 415

53,835 associate members

The agricultural members of the federated network take part in the deliberations of Sollio Cooperative Group’s Annual General Meeting by delegation.

 

The number of delegates attributed to each cooperative is based on a calculation that factors in the number of its members and its sales volume with Sollio Cooperative Group during the year. In 2020, 231 delegates out of a potential 301 exercised their rights, for a participation rate of 77%.

 
 
 
Delegate participation at Sollio Cooperative Group’s Annual General Meeting
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During the year, the President’s Tour, the Presidents’ Forums, as well as the biannual meeting also allowed the network’s elected members to consult each other and guide Sollio Cooperative Group’s Board of Directors’ actions.

The cooperatives contribute equitably to Sollio Cooperative Group’s capital, holding $336.5 million in Sollio Cooperative Group shares, and $840.4 million in a collective reserve.

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During the year, Sollio Cooperative Group distributed $29.2 million in patronage refunds to cooperatives and paid a $7.7 million dividend to the Cooperative Pork Chain.
princip 3
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Sollio Cooperative Group is an autonomous organization, under the control of member cooperators. Our organization ensures its continued independence from lenders by maintaining conservative financial ratios. We follow sound governance practices, most notably by separating the positions of President and General Manager, by ensuring directors’ independence from management and by pursuing sustainable results. Sollio Cooperative Group also recognizes the autonomy and independence of its member cooperatives.

Personal and collective development is a key component of the Working Alliance, which sets a range of reciprocal commitments between employees, directors and the organization. Accordingly, Sollio Cooperative Group and its subsidiaries contribute to talent development through annual investments of nearly $11 million.

 

More specifically, we invested 1.22% of the payroll of the parent company and the Agriculture Division, 2.54% of Olymel’s payroll and 1.51% of BMR’s payroll in training activities In addition, a host of training courses are offered to the next generation of agricultural producers to help prepare the network’s leaders of tomorrow.

 

Sollio Cooperative Group also strives to educate the general public on the nature and relevance of its organization. With this aim, it supports national cooperative initiatives such as Co-operative Week and Co-operative Succession Week.

55 Young people were added to the ranks of the 747 beneficiaries of the Fonds coopératif d’aide à la relève agricole during the year and gained access to a number of free-of-charge training courses.
Sollio Cooperative Group promotes inter-cooperation among its member cooperatives.

 

We are associated with some twenty other cooperative organizations dedicated to promoting cooperation and sustainability, including the Conseil québécois de la coopération et de la mutualité (CQCM), Cooperatives and Mutuals Canada (CMC), the Fondation québécoise pour l’éducation à la coopération et à la mutualité, the Société de coopération pour le développement international (SOCODEVI), Coop Carbone, the Chair in management and governance of cooperatives and mutual organizations of the Institut de recherche sur les coopératives et les mutuelles de l’Université de Sherbrooke (IRECUS) and the Centre interdisciplinaire de recherche et d’information sur les entreprises collectives (CIRIEC-Canada).

 

Sollio Cooperative Group and its network have collaborated with SOCODEVI to support the development of cooperatives in underdeveloped regions. Since 2003, we have participated in 170 technical support missions in 16 countries and offered 2,039 days of support.

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During the year, before the pandemic struck, Sollio Cooperative Group has graciously contributed to two support missions in the projects of SOCODEVI for 28 days. In the picture, Claude Boisvert of Sollio Cooperative Group on a support mission with SOCODEVI in Vietnam.

Sollio Cooperative Group promotes sustainable development in the communities it operates in. Among the UN’s 17 Sustainable Development Goals, Sollio Cooperative Group has targeted six to focus its efforts on:

 

  • Zero hunger
  • Good health and well being
  • Clean water and sanitation
  • Decent work and economic growth
  • Responsible consumption and production
  • Climate action

 

We have produced a comprehensive corporate responsibility report detailing our achievements in these fields. In 2020, with the difficulties posed by the pandemic, we created a special initiative entitled From Us to You. Seventeen member cooperatives and many employees joined Sollio Cooperative Group in raising $450,000 in market value of foodstuffs and $100,000 in cash. Throughout the year, we support organizations and events we consider worthy.

 

  • During fiscal 2020, Sollio Cooperative Group and its divisions awarded communities $3.9 million in donations and sponsorships.
  • Donations with a value of $2.5 million were largely contributed by Olymel, which donated food products totalling $1.9 million, primarily to Moisson organizations.
  • Sponsorships with a value of $1.3 million were mainly allocated to organizations or events promoting agri-food ($441,069), culture ($171,600) and youth ($96,678).
  • $550,000 in market value and cash was donated by the parent company and 17 network cooperatives to the From Us to You initiative, launched during the pandemic to provide quick and direct help to communities.
  • $51,795 was donated to the Make-A-Wish Foundation by BMR.
OUR story
Sollio Cooperative Group is an organization resolutely turned towards the future.
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Creating value in three industries
100 years of cooperation