2017 Annual Report - A Message to our Members | UFA Co-operative Ltd.

2017 Annual Report

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> A MESSAGE TO OUR MEMBERS >>>

Dear Members,

Drive. It’s a word that evokes a feeling of moving forward. We’ve selected it as the theme for our 2017 member report because it captures what we accomplished this past year. It also speaks clearly to the momentum we’ve gained heading into the future.

Our “drive” to improve our business over the last three years has paid off as we have achieved our goals of returning to profitability and paying patronage and while we recognize there is still work to do to improve our co-operative, we are pleased by our results to date. It is because of our combined efforts and your loyalty that earnings from continuing operations of $31.0 million positioned us to declare a patronage dividend of $12.5 million to our members in 2017. We believe this result strongly reflects that we are On the Road to Better. We sincerely thank our employees and petroleum agents for their hard work, our elected officials for their leadership as well as our members and customers for their loyalty.

One of the greatest drivers at UFA is our vision. It speaks to the co-operative we aspire to be: the most trusted and reliable supplier of petroleum, crop, livestock, building products and services in the markets we serve. We are very proud of the results achieved in 2017. Our pledge to our employees and to our membership is that we will not take our foot off the gas. We will continue to “drive” improvements in our business to achieve this vision.

Our foot is still on the gas, and as your co-operative we will continue to DRIVE forward.

This member report shares the story of our journey of being On Road to Better. The strong financial position we have achieved in 2017 now allows UFA to pivot. After many years of effort from our employees and UFA petroleum agencies in reducing costs and achieving efficiencies, we can now once again focus our attention on investing in and growing our business for the future benefit of our members and customers. Last year we promised you our focus would be to: increase our engagement with members, customers, employees and other stakeholders; “drive” the day-to-day execution of our business; and, make it easier for you to do business with UFA. We believe we have driven success in each of these areas in 2017.

We started down this road with our Board of Directors defining a renewed vision and mission statement. Senior management then created a three-year-plan for the business. Five strategic imperatives were identified within that business plan, which provided us with a road map for “driving” improvements within our business. These imperatives were:

  • Transform UFA’s assets to ensure our asset base is productive;
  • Ensure UFA is a relevant supplier to our customers and members;
  • Enable the business to do what is needed to “drive” success;
  • Support sustainability of the co-operative through good governance; and,
  • Drive operational excellence throughout UFA.

Our plan guided us in our decision-making in 2017, as we worked to transform our assets throughout the year. First, we conducted an orderly wind down of the Wholesale Sports business. Faced with an increasingly competitive environment, the continued shift to online purchases and an overall slowing of consumer discretionary spending, including in the outdoor industry, it was very clear that we needed to make the strategic decision to close this business. We clearly communicated with all stakeholders and treated everyone, especially our employees, with great care and respect as we exited the business. We also wanted to recognize, that while the business was well-run, continuing to operate it would only detract from the strong financial position of our co-operative. The Wholesale Sports chapter of UFA’s history is now closed as the litigation that was previously filed against us concluded in early 2018. The divestment of this business and the completion of the lawsuit now positions UFA to focus on its core businesses of agriculture and petroleum.

Transforming our assets also meant being proactive and responsible when it came time to optimizing our cardlock network. We made the decision to close our Delburne and Rockyford cardlock sites in 2017. However, transforming our assets didn’t only involve closing facilities, we also reinvested significantly in our business this past year. We rebuilt our cardlock site in Spirit River, Alberta and opened a new location in Beaverlodge, Alberta which included a cardlock diesel exhaust fluid (DEF) dispenser. Investing in our petroleum network will continue to be a focus for UFA in 2018, as we look forward to building a new cardlock location in Fort Macleod and adding new DEF dispensers at additional locations for the convenience of our customers.

We also reinvested back into our business late in the year when we announced the acquisition of the Bridgeland Limited Partnership from CHS Inc. The decision reinforced UFA’s commitment to our core business and to our members and customers in one of our most important agricultural geographies in the province. Reinvestment in the co-operative will continue in 2018 as we embark upon one of the largest investments your co-operative has made in a decade. UFA will be implementing a new enterprise resource planning system (Microsoft Dynamics 365) for our AgriBusiness division. We need to replace an outdated point of sale system and automate our business processes to best serve our members and customers going forward. This improvement to our internal systems will improve efficiency across our business. This investment will transform our AgriBusiness capabilities, drive operational excellence and enable us to provide e-commerce options for our customers and members in the very near future.

We have 6,000 products online at UFA.com that show product availability at any UFA store location.

Products Available Online

In 2017 we heard our members when they told us they wanted us to be a relevant supplier for their business. They told us to keep important programs such as Deferred Credit and myUFA, as well as to continue posting product and other information to UFA.com. In fact, more than 16,000 members and commercial customers now have online access to their account information through myUFA. We have 6,000 products online at UFA.com that show product availability at any UFA store location. We will continue to add products to our online assortment in 2018.

Perhaps one of our biggest good news stories of the year is found within our Retail AgriBusiness division and at our UFA Farm & Ranch Supply stores. This group has been diligently working to drive operational excellence and improve its operations and performance. Not only have they experienced increased traffic coming into our stores in 2017, their focus on delivering exceptional customer service and transforming internal supply chain operations has resulted in better selection and pricing for members and customers. Their continued perseverance and remarkable transformation is highlighted by year-over-year sales results that grew by eight per cent which were then driven by double digit same store sales increases over the last six periods of 2017. We are very optimistic about the positive momentum for the Retail AgriBusiness carrying over into 2018 and are already implementing improvements in our stores.

We committed to you in 2016 to improve on our government relations to better represent the interests of our membership. In 2017, we established a Government Relations committee consisting of UFA Delegates, Directors and dedicated internal resources to ensure our members’ voices are heard at the table when important public policy decisions are being made. Issues such as the new small business tax changes, farm safety legislation, and the Canadian Agriculture Partnership are just a few areas where UFA is working with all levels of government to provide policy input on behalf of our membership. The government relations function supports a sustainable vision for our future, allows us to participate in an ever-changing regulatory environment and to be the voice of our members at a government level.

Our journey On the Road to Better all started from listening to you, our members. We asked “How can we better serve you as your co-operative?” We wanted to be accountable to you and remain focused on paying patronage. This focus drove the decisions and changes we made in 2017. We are now in a strong financial position to capitalize on new opportunities. We can also assure you that our steadfast focus on improvement remains for 2018. With an environment that is changing quickly, we must continue to change as well. While we are happy to share these results with you, we are not satisfied with this alone. We will continue to push forward and drive the business to better serve you as your co-operative.

On behalf of the Board of Directors, Delegates, employees, and petroleum agencies, we believe our results demonstrate that we truly are On the Road to Better. Our foot is still on the gas, and as your co-operative we will continue to drive forward to deliver for you. We are thankful for our members and customers’ continued loyalty and for trusting in their co-operative. We are grateful to be steering this 109-year-old co-operative and to be confidently in the driver’s seat, travelling On the Road to Better!

Co-operatively yours,

Kevin Hoppins

Chairman of the Board

Carol Kitchen

President & Chief Executive Officer

Retail AgriBusiness

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