UGG announced today that it had a profit of $7.5 million for the fourth quarter of its fiscal year, bringing annual net income to $2.2 million. 

"The short story for our year is that improvements in operating performance were offset--almost dollar for dollar--by increases in depreciation'', said Brian Hayward, UGG's Chief Executive Officer. "The numbers clearly show that operating expenses remain well contained. The challenges we have been facing are primarily revenue related, and stem from ongoing weak economic conditions within the world agri-food industry.'' 

UGG earnings before interest, taxes, and depreciation (EBITDA) grew by 14% to $48.8 million. Gross profit grew by $7.6 million due to higher grain volumes and stronger demand for manufactured feed. Cash operating expenses were only 1% higher, even with the increase in
business volume. Depreciation and interest expense--mainly associated with investments in
grain handling infrastructure--grew by $8.9 million. 

UGG's grain investments have been made with longer-term fundamentals in mind. The Canadian grain system is moving from being storage based, to throughput based. "Companies like UGG can't make that shift overnight'', said Hayward. "However, we have virtually completed our infrastructure renewal program and are now poised to reap the benefits when industry conditions improve--we are confident conditions in grain will improve, as they have in livestock''. 

Livestock Services operating profit improved by 84% to a record $9.1 million. Feed demand grew, and the company has begun to realize returns from its investments in feed manufacturing capacity and hog production partnerships. 

Grain operations operating profit grew 4% to $15.3 million. Industry grain volumes rose, and UGG also gained market share. However, margins were off slightly because grain-shipping patterns--particularly in CWB grains--have uncharacteristically favoured routings where UGG cannot capture full revenue potential. 

Crop Production Services earnings weakened in the face of poor grain prices, adverse weather conditions and a decline in canola acreage--a key product line for UGG's Proven Seed group. These external forces stifled short-term growth in the market for farm supplies and suppressed margins. Gross profit in Crop Production Services fell $2.8 million, and was the main factor causing operating income to decline from $16.6 million to $12.5 million.  

Farm Business Communications operating profit grew 18% to $1.5 million, due to expense
reductions. 

UGG earnings per share were 6 cents in fiscal 2000, down from 15 cents in 1999. 

"While we're disappointed with the overall lack of earnings growth, it's also clear we are making progress relative to competitors in the market'', said Hayward. "Our operations are modern and efficient and we have continued to improve on already high marks in customer satisfaction surveys. That bodes well for UGG shareholders when market conditions become more positive. In the meantime, the company will trim its sails on capital expenditure to ensure our balance sheet remains in good condition. We will also continue to contain expenses and successfully innovate--to sustain our positive competitive momentum.'' 

UGG is one of western Canada's largest agribusiness firms. Founded in 1906, the Winnipeg based company is diversified into grain merchandising, crop input sales and distribution, livestock production services and farm business communications. UGG is publicly traded on the Toronto Stock Exchange and Winnipeg Stock Exchange, under the symbol "UGG''. For further information on UGG, contact company web sites at www.ugg.com or www.ugginvestor.com.  

Company news release
N2993