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Winnipeg Free Press - PRINT EDITION

Winkler business selling its suns

Sunflower processor acquired by LWI

By: Martin Cash

Posted: 08/28/2012 1:00 AM | Comments: 0

Ken Janzen, CEO of Keystone Grain, enjoys a sun-bathed sunflower crop near Winkler Monday. (TREVOR HAGAN / WINNIPEG FREE PRESS) Photo Store

THERE'S a growing global market for specialty crops grown in Western Canada and Legumex Walker Inc. (LWI) is determined to ensure it has a full selection in its basket of offerings for customers around the world.

Its latest play is the acquisition of Winkler-based sunflower and flax processor Keystone Grain Inc., the largest processor and marketer of sunflowers and sunflower products in Canada.

It's fitting the deal is coming together late in the current crop year, as Manitoba's 90,000 acres of sunflower are traditionally the last fields to be harvested.

Ken Janzen, the CEO of Keystone Grain, said the decision to sell the business -- that includes a sunflower processing facility and a flax processing facility in Winkler and a bird-food processing facility in Winnipeg -- has been in the works for a while.

"We had hit a particular size, where we were a player in the marketplace but compared to U.S. competitors, we were a small player," Janzen said. "We wanted to align ourselves with someone else who would give us a more strategic position in terms of marketing existing products and rounding out our product offering."

Keystone Grain generates about $55 million in annual revenue with a workforce in three locations of just under 70. Janzen said the deal with LWI is probably going to mean an increase in employment for the sunflower specialist.

Legumex Walker, formed just a year ago with a public share offering after the merger of two large specialty crop processors in Manitoba and Saskatchewan, has been hard at it since diversifying its commodity portfolio and its locations.

The addition of three more processing facilities from Keystone will give LWI a total of 13 in North America as well as ownership in a bean processing plant in China. The company is also in the final stages of construction of a canola pressing plant in Washington State.

"The whole story of the IPO (initial public offering) was diversification to deal with weather risk and geographic diversification for sourcing commodities.," said LWI's chief executive officer Joel Horn.

While sunflower acreage may be down in Manitoba this year after a couple of years where crops were ruined by excessive moisture, Janzen and Horn are bullish for the future of the crop. About 90 per cent of Canadian sunflower production occurs in Manitoba.

"The pie is already growing," Horn said. "The question for us is how to service customers because they want to buy more and more product and they want a reliable source of high-quality product from someone they know and trust."

LWI has been strategic in growing its processing and commodity sourcing on both sides of the border. This year it bought St. Hilaire Seed Company, in Minnesota, one of the largest dry bean processors in the United States and a sunflower seed processing facility in Mentor, Minn.

That helps in hedging against regional weather fluctuations and it also means greater flexibility in reaching markets throughout North America and around the world.

"It allows us to source product from both sides of the border and ship from both sides of the border," said Horn. "We can ship from Montreal or by rail into Mexico. It just give us so many options."

LWI already owned a sunflower facility in St. Jean, Man. The Keystone acquisition makes LWI the dominant sunflower processor in the country.

Kelly Dobson, chairman of the National Sunflower Association of Canada, said sunflowers are grown under contract and the association currently has a $1-million, three-year pilot project underway to introduce new varieties that might be more adaptable to Manitoba conditions and more in demand.

There are two types of sunflowers grown -- one for the confection market and another for the oil market. The oil seed variety is de-hulled and bits and the excess from that process is marketed as birdseed.

LWI shares closed down 14 cents to $7.42.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 28, 2012 B4

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