Sunopta Inc (STKL) 2008 Q3 法說會逐字稿

Good day and welcome to the SunOpta third quarter 2008 results conference call. Please note that today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Steve Bromley, President and CEO. Please go ahead, sir.

Thanks very much. Good morning, ladies and gentlemen, and welcome to the third quarter 2008 shareholder conference call for SunOpta, Inc. I'm joined on this call today by Jeremy Kendall, Chairman of the Board of Directors; John Dietrich, Vice President and Chief Financial Officer; and Ben Chhiba, the Company's Vice President, General Counsel and Secretary.

Before I begin, I would like to remind listeners that except for the historical information, the matters discussed during this conference call may include forward-looking statements, including statements related to our operating earnings that may involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements.

These risk factors are detailed in SunOpta's filings with the Securities and Exchange Commission. Please note that our financial results are reported in US dollars and in accordance with US GAAP. We plan to file our 10-Q for the quarterly period ended September 30th, 2008 by no later than the close of business tomorrow.

Before we discuss our third quarter results and ongoing operations, I would like to call in Jeremy Kendall to address the executive level changes, which have been approved by our Audit Committee and Board of Directors and were included in our announcement at the close of business yesterday. Jeremy?

Thanks, Steve, and good morning everybody. As you are aware, our Company was impacted by a series of events in 2007, which led to the write-down of inventories in the SunOpta Fruit Group Berry Operations in fiscal 2007 and then the subsequent restatement of our quarterly financials for that period. As a result, our Audit Committee conducted a thorough internal review of this event and in doing so, provided a series of recommendations to the Board of Directors. Each of these recommendations have been fully implemented or are in the process of being implemented. We believe these recommendations will enhance our corporate oversight, enhance the due diligence process for prospective acquisitions, as well as the integration of those acquisitions, strengthen our legal department and internal audit department functions, increase the number of independent directors to the Board, and improve inventory controls.

After a thorough review of the actions taken to date and the future direction of the company, the Audit Committee and the Board of Directors have decided to reverse its position on certain of their recommendations, as I will now discuss. So, in this regard, Steve Bromley will remain in his position as President and Chief Executive Officer and it is planned that he will be re-nominated to the Board of Directors at the next annual meeting, as the decision has been taken to reverse or its previously announced plan from Mr. Bromley to transition from his executive position by December of this year. Mr. Bromley has been with the company since 2001 and has served in a number of key operating roles since that time, including Chief Financial Officer, Chief Operating Officer, and most recently Chief Executive Officer.

Secondly, the Board of Directors has reversed its decision to require the Chairman of the Board to be independent and thus I will be continuing in this role until such time as the Board wishes me to step aside. The Company continues to search for a new Vice President and Chief Financial Officer and is now entering the final interview phase, and consistent with the Audit Committee recommendations, expects to have a new candidate in place by the end of this calendar year. John Dietrich, the current Chief Financial Officer, has agreed to an extended transition period through March 2009 to assist the new Chief Financial Officer through the 2008 year-end audit. Subsequent to this transition, Mr. Dietrich is expected to assume a non-financial role within the organization. We'll continue to update you on the progress in finalizing our search for a new CFO, but at this time I can tell you that we have some absolutely excellent candidates.

Our SEC counsel has notified the SEC of these changes and we continue to cooperate fully with the SEC. We believe these developments are in the best interest of our organization, our employees, and our shareholders. Let me assure you that we remain fully committed to strong corporate governance and to continue to improve our processes and practices in this regard. This is of utmost importance to our organization.

And now to pass this call back to Steve Bromley.

Thanks, Jeremy. For the three months ended September 30, 2008, the Company realized its 44th consecutive quarter of increased revenue growth versus the same quarter in the previous year. Revenues in the third quarter increased by 41.2% to $287.7 million as compared to $203.8 million in the third quarter of 2007, and these revenues included a 21.4% internal growth rate.

Third quarter 2008 revenues in the SunOpta Food Group increased 41.3% to $257.8 million versus $182.5 million in Q3 2007, driven by internal growth of 20.7% and the impact of the acquisition of The Organic Corporation known as Tradin Organics in April 2008, which contributed revenues in the third quarter of approximately $37.6 million. Revenues in Opta Minerals Inc. increased 43.7% to $29.4 million for the quarter and revenues in SunOpta BioProcess Group decreased to $474,000 versus $779,000 in the third quarter of 2007.

Earnings for the quarter were $3,904,000 or $0.06 per diluted common share as compared to 2007 third quarter earnings of $3,042,000 or $0.05 per diluted common share. Third quarter 2008 results include professional and related fees and severance costs of $1,827,000 related to the Company's investigation into the write-down in the SunOpta Fruit Group Berry Operations, as discussed by Jeremy, offset by the reversal of a previously recorded severance accrual of $1.812 million related to the CEO and CFO changes. The net impact of these costs are in effect -- have a zero effect for the quarter essentially, thus the earnings per share after inclusion of these items remains at $0.06 per diluted common share.

Without these professional fees and the severance accrual reversal, as well as a number of non-recurring start-up costs, adjusted earnings for the quarter would have been $5,237,000, representing an increase in earnings of approximately 72% versus Q3 2007. These non-recurring start-up operational and legal costs include costs of $315,000 related to the commissioning of our new Modesto soy processing facility expected to start up late in the second quarter of 2009, lost profits of approximately $525,000 due to the Q2 flood and effect on our fiber facilities within the Ingredients Group, legal fees of approximately $400,000 for our arbitration case related to the Abener arbitration, and additional costs of approximately $420,000 related to the commissioning of our equipment at the Verenium plant, steam explosion equipment at the Verenium plant in Louisiana, directly related to a workmanship issue from a supplier. We expect to receive compensation from our insurance provider for some of our lost profits due to the flooding and also expect to collect from the subcontractor on the Verenium equipment. Any of these benefits have not been included in our Q3 results.

For the nine months ended September 30th, 2008, the Company has realized revenues of $810.1 million versus $592.7 million in the first nine months of 2007, an increase of 36.7%. Consolidated internal growth for the first nine months was 20.7%. Earnings for the nine-month period in 2008 were $6,109,000 or $0.09 per diluted common share versus $7,501,000 or $0.12 per diluted common share in 2007. These results include net professional and related fees and severance costs of $7.6 million related to the Company's investigation into the results for the year ended December 31st, 2007. Without these professional, severance and related costs, earnings for the nine months were approximately $11,336,000 or $0.18 per diluted common share. After accounting for the year-to-date impact of the non-recurring costs, plus these legal and related costs, non-recurring costs of which I spoke about later, earnings for the first nine months of 2008 would have been $13,491,000, representing an increase in earnings of approximately 80% versus the same period in 2007.

Operating income for the third quarter was $9,434,000 as compared to $5,762,000 in Q3 2007, an increase of approximately 64%. Segment operating income within the SunOpta Food Group increased 9.7% to $5.6 million and operating income in Opta Minerals increased 13.4% to $2,536,000. The SunOpta BioProcess segment incurred an operating loss of $1,541,000, largely driven by the increase in project costs and legal fees, as previously mentioned. The Corporate segment had increased operating income of $3.608 million over the same period in 2007, due to net foreign exchange gains in the amount of $4,345,000, offset by incremental operating costs to support continued growth in the business.

The SunOpta Food Group reported segment operating income of $5,598,000 versus $5,105,000 in Q3 2007. The improved segment operating income was driven by the SunOpta Berry Operations and SunOpta International Sourcing and Trading Groups, which realized increases of 62.4% and 209.8% respectively in their operating income, due to strong sales, improving operating margins, and the impact of the Tradin Organics acquisition. The improvement in the Berry Operations segment continues a trend that was realized in the second quarter of 2008, reflecting improved results as inventories that were written down in 2007 to net realizable value are sold through, improved pricing and reduced storage costs are realized in hand with the benefits of the new management team and improved internal processes.

Offsetting these increases in operating income were lower income in the SunOpta Grains and Foods Group due to lower market prices versus the same quarter in 2007, increased input costs and certain non-recurring start-up costs of approximately $315,000 related to Modesto, which we noted earlier. Lower income in the SunOpta Ingredients Group was due to increased input costs and the impact of flooding in the Midwest that occurred in June 2008, which had an impact of approximately $525,000 in the quarter. There was also slightly lower operating income in the SunOpta Distribution Group due to the impact of the lower value of the Canadian dollar and increased freight and logistics costs in the third quarter of 2008 relative to the third quarter of 2007.

Opta Minerals realized segment operating income in the third quarter of 2008 of $2,536,000 as compared to $2,236,000 in Q3 2007, an increase of 13.4%, driven by strong sales of abrasive products in the US combined with increased sales of magnesium desulphurization products to the steel industry, and the 2007 acquisition of Newco, the Company's industrial minerals operation located in Slovakia, as well as the July 9th, 2008 acquisition of MCP of France.

Segment operating results in the SunOpta BioProcess Group for the third quarter recorded a loss of $1,541,000 versus a loss of $812,000 in 2007, reflecting the negative impact of the approximately $820,000 of project costs and legal fees, which were previously described.

The group continues to work on a number of projects that are expected to utilize its technology in the production of cellulosic ethanol. It should also be noted that we have provided separate segmentation of results for SunOpta BioProcess in our financial statements. It should also be noted that this group is separately financed and has a current cash position of approximately $25 million. So, they are well positioned to move forward in the continued development of their technology and there certainly does appear to be a strong interest in that technology and their equipment for the pre-treatment of biomass for the production of cellulosic ethanol.

At September 30th, 2008, the Company's balance sheet reflects a current working capital ratio of 1.74 to 1, long-term debt to equity ratio of 0.45 to 1, and total debt to equity ratio of 0.8 to 1. During the third quarter of 2008, cash provided by operations was $23,704,000 versus 2007 where we utilized $11,489,000, indicative of the Company's efforts to maximize cash generation. A bulk of the change in the quarter has come from inventory reductions due to reduced commodity prices and volumes in the Grains and Foods Group, as they prepare to receive their 2008 crop.

However, we also had reductions within all the other food groups, including Berry Operations, which just came through its season of building supply. This increase compares to a $14 million investment in working capital in 2007 for a net improvement of over $30 million. We continue to reduce -- work to reduce our inventory levels, especially in these uncertain economic times that we find ourselves in.

The Company has total assets of $634.8 million and a net book value of $3.97 per outstanding share. In the first half of the year, the Company has obtained amendments to certain covenants for the fiscal quarters ended June 30th, 2008, September 30th, 2008, December 31st, 2008 and March 31, 2009 and is in compliance with these revised covenants at the end of September.

The results of the third quarter reflect both the strong growth in the Company's operations plus the impact of the extensive turnaround efforts in the Berry Operations and obviously the positive impact of the acquisition of Tradin Organics. Our operations continue to grow and when combined with a continued focus on improved internal processes, are well positioned for the future.

Having said that, these are unprecedented economic times driven by slowing economies around the world, tight credit conditions, and volatile foreign exchange markets. We expect our core food operations to hold up very well in these markets, but feel our non-core operations and specifically Opta Minerals will be significantly impacted due to the nature of their businesses. In addition, we expect to be unfavorably impacted by the translation of foreign-denominated operations into US dollars for reporting purposes. Over the past several months, the Canadian dollar and Euro have dropped approximately 20% versus the US dollar. This has been fast and very unprecedented.

Based on this, we can reconfirm our expectation that we will realize revenues in excess of $1 billion for fiscal 2008, but have revised our 2008 earnings guidance to a range of $0.19 to $0.23 per diluted common share, reflecting the expected downturn in non-core businesses and the impact of foreign currency. Beyond that, our core food business is expected to operate well through the fourth quarter. For your information, our diluted shares for the quarter were 64,763,000 and year-to-date are 64,753,000.

I'll now get into a little bit more detail on each of the operating groups. Within the Grains and Foods Group, revenues were $88.2 million in the third quarter, an increase of 35.7% over the same quarter in 2007. This increase was attributed to internal growth due to higher demand for non-GMO and organic grains and ingredients, and obviously higher commodity prices on soy, corn and sunflower products when compared to the same period last year. The group also realized increased sales of aseptic soy and extended shelf life soy beverages due to the continued growth in volumes from existing contracts and new business. The impact of this growth was partially offset by operational inefficiencies during the quarter, in part due to the expansion of the aseptic filling facility located in Alexandria, Minnesota.

Revenues in the sunflower-based businesses were also higher due to increased demand for in-shell and bakery kernel sunflower products. For the nine months, revenues were $247.2 million in this group, an increase of over 35% versus the prior year, again due to internal growth and the increased commodity prices. Segment operating income decreased by $1,198,000 or 27.4% in the third quarter of 2008, as compared to the third quarter of 2007, as a result of lower gross margins of $910,000 due mostly to increased input costs, delayed pricing, and period costs related to the Modesto facility that we are in the process of building. In addition, inefficiencies at our Minnesota facility impacted margins, as the plant expansion was finalized and the processing lines were commissioned during the period.

The third quarter of 2007 was the best third quarter this group had ever realized and while the earnings are down versus 2007's third quarter, it should be noted that this is the second best third quarter that the SunOpta Grains and Foods Group has ever posted. Year-to-date segment operating income increased by $1,906,000 or about 15.4%, reflecting higher gross margins, higher volumes and improved margins from higher commodity pricing, offset by increases in SG&A to support continued business growth. Completion of the expansion at our aseptic packaging facility in Minnesota in addition to price increases passed on to current customers during the third quarter are expected to result in increased aseptic packaged revenues and margins in the fourth quarter. The Heuvelton facility and Alexandria expansion projects, both became fully operational during the third quarter. Grain margins are expected to remain relatively strong through the balance of 2008.

The Grains and Foods Group will continue to incur period costs related to rent, labor, property taxes and travel related to its new Modesto facility through the balance of 2008, as well as similar costs although at a lower level with regards to the Colorado Mills' expansion of oil refining capabilities. The sunflower crop this year is above average in the high and Southern Plains region. Combined with an extension of our sourcing area, we estimate strong increases in production for our Kansas plant, which will allow us to meet strong demand for our sunflower seeds in Europe. Our soy bean and corn harvests have been slightly delayed due to wet weather, but supply will be at 2008 levels and sufficient to meet demand from our customers. All in all, a good crop.

The SunOpta Ingredients Group contributed revenues in the quarter of about $16.6 million, as compared to $17.4 million in 2007, a 5% decrease. Reduced revenues resulted primarily from lower dairy and other ingredient blending volumes, very similar to prior quarters, and lower selling prices on dairy blends, offset by higher oat and soy fiber volumes, which in this particular quarter increased by $535,000. Year-to-date revenues are $50.3 million, as compared to $51.6 million in 2007, a decrease of 2.5% primarily attributable to the same factors, which I discussed for the third quarter.

Segment operating income in the third quarter was $700,000 versus $1.478 million last year. This decrease is due to plant inefficiencies resulting from plant shutdowns and subsequent start-ups following the series of floods that impacted the Midwest United States. Costs of approximately $525,000 were incurred in the quarter related to these shutdowns and start-ups. As I mentioned earlier, we are pursuing business interruption insurance, but at this time have taken nothing back to our financial statements. The group is currently completing that interruption claim and we'll be filing it.

Higher raw materials -- higher cost of raw materials and freight costs also impacted the business throughout the quarter. The decrease in segment operating income of $1.362 million for the first nine months really reflects many of the same factors, as I just noted. The SunOpta Ingredients Group continues to focus on diversifying its fiber and ingredient portfolio via a combination of internal development, value-added blends, distribution agreements and joint ventures. The group executed price increases late in third quarter to offset higher input costs and also expects to recover some of the cost of the insurance related to our business interruption. The group continues to target operating margins of 12% to 15% and expects to realize these levels over time through a combination of pricing, cost reduction and value-added initiatives. During the month of September, we started to see the impact of the incremental pricing and September was the best month that this business has had so far in 2008 and we look forward to a positive fourth quarter.

Effective July 1, 2008, the Company has realigned its segment reporting within the SunOpta Food Group to divide the former SunOpta Fruit Group into two new operating segments; SunOpta Berry Operations and Other, and the SunOpta International Sourcing and Trading Group. SunOpta Berry Operations and Other is comprised of the 2003 acquisition of Kettle Valley Dried Fruit, the acquisitions later of Cleugh's Frozen Foods and Pacific Fruit Processors, and the acquisition of the Hess Food Group along with the 2000 Mexican acquisitions, which were completed on the berry processing side. Revenues for the SunOpta Berry Operations and Other were $39.3 million in the third quarter of 2008, as compared to $34.7 million in 2007, a 13.3% increase attributed mainly to internal growth of $767,000 and $2 million due to a change in business in our brokerage operations that led to reporting revenue on a gross basis rather than on a net brokerage basis.

Our Healthy Fruit Snacks division increased revenues by $2.6 million as a result of additional customers and the increased capacity brought on by the new [bio-farming] equipment partially offset by lower sales in other parts of the Berry Operations. Revenues for the first nine months in the Berry and Other operations are $117.9 million as compared to $101.6 million in 2007, a 16% increase, due mostly to increased revenues of $9.3 million in Healthy Fruit Snacks and the acquisition of the Mexican Berry Operations in May 2007, which contributed $5.8 million in incremental revenues.

Segment operating income in the Berry Operations and Other category improved by $1.775 million to a loss of $1,068,000 in the third quarter, as compared to a loss of $2.843 million in the third quarter of 2007 due to the increase in gross margin of $2.587 million and a reduction in bad debt expense of $287,000. This was partially offset by increases in compensation costs of $955,000 due to severance, increased headcount to support the expanded business, new industrial programs, and initiatives to improve internal processes. Gross margin improved $1,063,000 in our brokerage, Healthy Fruit Snacks, and fruit topping operations due to increased revenues as a result of expanded product offerings. The balance of the increased margin in the quarter results from improved plant efficiencies and increased selling prices in the Berry Operations, partially offset by increased storage costs as a result of excess inventory.

Segment operating income in the Berry Operations increased by $1.254 million to a loss of $7.021 million in the nine months ended September, as compared to a loss of $8,275,000 in the same period in 2007. The improvement in year-to-date results is caused by improved customer pricing in the Berry Operations and increased margins in our brokerage, fruit snacks, and topping operations. These improvements were partially offset by plant inefficiencies in the berry plants in the first half of 2008, as a result of lower production volumes due to our efforts to sell excess inventories, which existed at December 31st, 2007. It should be noted that of the $54 million of inventories in the Berry Ops at the end of 2007, this amount has been reduced to $11 million at the end of the third quarter and will be further reduced over the fourth quarter.

In summary, we should be through the bulk of our excess Berry inventory issue by the end of this year. The Berry Operations continued to work through that inventory. We've taken pricing on a number of the products in this business throughout the back half, later in the third quarter and we expect that to assist and improve the results as we move forward. Going forward, as well as the Berry Operations transition to a more favorable sales mix of new products combined with plant efficiencies and price increases, we do expect to see significant improvement and a move into profitability once again in 2008.

The SunOpta International Sourcing and Trading Group is comprised of the Organic Ingredients acquisition in 2004 and the Tradin Organics acquisition in 2008. Revenues for the SunOpta International Sourcing and Trading Group were $51.1 million in the third quarter, as compared to $12.5 million in 2007, a 308% increase. The acquisition of Tradin on April 2nd provided $37.6 million of the $38.6 million increase with the balance coming from our existing global sourcing and trading operations, which was driven primarily by increased private-label sales.

For the first nine months, the SunOpta International and Trading Group had revenues of $116.4 million as compared to $40.4 million in 2007, an increase of 188.5%. Internal growth within the group was 15.3%, which includes growth on Tradin's base business and obviously our base business, which existed prior to the acquisition of Tradin. Gross margins in the SunOpta International Sourcing and Trading Group increased by $7.6 million during the nine months ended September to $14.4 million or 12.3% of revenue, as compared to 16.8% of revenue in the same period in 2007. Of this increase, $7.5 million is due to the acquisition of Tradin.

Segment operating income increased by $795,000 to $1.174 million in the third quarter. The increased operating income results from the acquisition of Tradin offset by lower margins in our previously existing global sourcing operation caused by higher raw material distribution and storage costs, as well as increased SG&A to support expanded business operations. For the nine months, segment operating income was $3.038 million as compared to operating income of $1.975 million during the first nine months of 2007. The increased operating income results from the acquisition of Tradin offset by increased SG&A costs and additional corporate management fees.

On April 2nd, 2008, acquisition of Tradin has significantly expanded the supply channel and product offerings available for this group and is expected to drive synergies across our businesses. Strategic expansions of the group's network are evidenced by the recent joint venture just set up in organic sesame seed hulling operation in Ethiopia, as well as assuming control of the organic coffee sourcing and processing assets of Alanheri Produkten BV. These two ventures are expected to add profitable revenues of approximately $10 million to our business.

The SunOpta Distribution Group contributed revenues of $62.7 million in the third quarter of 2008, an increase of $9.8 million or 18.5% over the same quarter of the prior year. Internal growth within the group was 16.8%, due to increases in natural and organic grocery sales and increased revenues from the natural health sector. For nine months, revenues are $201.1 million, an increase of $42.4 million or 26% -- 26.7% increase over the prior year. Internal growth within the Distribution Group, including internal growth on acquired companies, is 24.8% year-to-date.

During the quarter, operating income decreased by $101,000 to $1.621 million as a result of the impact of higher logistics and freight costs. Year-to-date increase in segment operating income of 27.8% or $1.8 million to $8.3 million in total reflects the increases in gross margins offset by increased SG&A and warehousing and delivery to support this increase. The SunOpta Distribution Group continues to focus on growing its customer base and maximizing warehouse utilization in its facilities, the expansion of exclusive brands and introduction of new brands through all distribution channels, the reduction of spoilage, and achieving other operating efficiencies through continuous improvement.

Opta Minerals, in which we own 66.6%, realized $29.4 million in revenue in the third quarter, a 43.7% increase versus the comparable 2007 period, representing approximately 10.2% of SunOpta's consolidated revenues. The increase in revenue was driven by the July 2007 acquisition of the businesses in Slovakia, the build-out of new production facilities in Laval, Quebec, and increased revenues in magnesium-based products sold to the mill and foundry and abrasive industries.

Quarterly statement operating income increased 13.4% to $2.536 million versus $2.236 million in 2007, reflecting the increased gross margin on increased sales, offset by higher SG&A and related cost to support the business operations and the impact of a foreign exchange loss on European-based operations. Year-to-date Opta Minerals has realized revenues of $76.1 million versus $55.3 million in the first three quarters of 2007, an increase of 37.4%. And operating earnings have also increased 37.4% to $7.9 million.

As we mentioned earlier, during the quarter, Opta Minerals completed the acquisition of MCP Mg-Serbian of France. MCP sells ground magnesium products to a variety of industries in Europe and really expands Opta Minerals' European operating platform, a key strategic initiative of that company. The results of the third quarter and year-to-date have been extremely strong for this business and may have continued to develop a strong operating business based on sound fundamentals. Unfortunately, the recent global economic downturn will have an impact on these operations, as one of the core customer groups is the steel industry. As I'm sure you are aware, the steel industry has very recently announced a precipitous downturn in their business outlook and have started to implement temporary idling and rationalization of manufacturing operations. We expect this to continue late into the first half of 2009. Fortunately, the non-steel customer base appears to be doing quite well at this time.

SunOpta BioProcess continues to focus on the development and implementation of its technology in the production of cellulosic ethanol. The group continues to work on a number of equipment supply contracts and hopes to finalize these efforts in the near future. The group has been active over the last few months with the installation and commissioning of equipment supplied to a cellulosic ethanol facility located in Jennings, Louisiana. As previously noted, additional costs were incurred during the quarter, as we had to repair a key piece of equipment, which failed due to a manufacturing defect during start-up.

We are pursuing the supplier of the equipment to collect these amounts. In the meantime, commissioning of the entire plant continues, including our installation and we are looking forward to the completion of this activity and the successful start-up of that plant. In addition, the group continues to expand its technology base through the addition of new patents and is also heavily involved in the feasibility phase of their joint venture to build a 10 million gallon cellulosic ethanol plant with Central Minnesota Ethanol Co-op. The first phase of the project has been completed and the second phase of the schedule has now commenced. During the third quarter, the arbitration hearings related to the failed Spanish contract with Abener were completed and final submissions have been presented. We expect a final decision on this in December 2008. The patent infringement arbitration against the former customer is ongoing and a decision is not expected in this regard until mid next year.

In closing, we want to thank you for your continued support. We are fully committed to continuing our efforts to build a strong and vibrant company and are most fortunate to have a wonderful company with exceptional growth opportunities and a strong balance sheet, supported by a wonderful management team and the support of over 2,200 employees.

With that, we would like to open the call to questions, but want to remind you that we will not be commenting on the events leading to the restatement or the Audit Committee's investigation. The events surrounding the restatement are the subject matter of litigation before the courts in Canada and the US, and therefore it is not appropriate to comment further at this time. Thanks very much and we'll now take calls.

Thank you, sir. (OPERATOR INSTRUCTIONS). And our first question will come from Ed Aaron of RBC Capital Markets.

Thanks. Good morning, guys.

Good morning, Ed.

So, first I was hoping you could talk a little bit more about the minerals business in the context of the press release you put out not so long ago talking about different leverage you might look at in order to create more value. I mean that was one that stood out as something you could do and with the changes that we are seeing now in that business, I mean as you reassess the idea of unlocking more value that might be reflected in the stock, I mean what's the next iteration of that in your minds as you look forward?

Sure, thanks, Ed. Obviously, the downturn in the steel industry came very quickly and on our call last week, the President of one of the largest steel companies in the world talked about how quickly this had changed. So, it's come upon us rather quickly after three really good strong quarters and great development and growth in the business. As you indicated and as we have indicated, we have been looking at various options to unlock shareholder value in that business and have studied a number of those, including the potential disposition of the business. And we continue to assess a number of those opportunities and we'll continue to do so. Obviously, with the downturn in the business now is probably not the time to be out there trying to market a business of that sense -- of this type. Good news is that it's a solid business, although we don't expect real good earnings in the fourth quarter, they'll have still posted record earnings for the year even with what we expect in the fourth quarter. So, we're continuing to look at those options, but quite frankly given the current credit environment and also the current state of the business with the economic downturn, probably -- now is probably not the time to be looking at selling it.

Thanks. And on your debt covenants, you have some amendments in place to carry through, I think, through the first quarter of 2009, and as you contemplate the changes in the minerals business and some of the just broader uncertainties in the market, I guess I'm trying to handicap the risk of you not being in compliance with debt covenants once the amendments are taken off?

Ed, the debt covenants apply to what I would call the core banking agreements. Opta Minerals has its own financing platform and syndicate in place, one. Two, BioProcess have their own banking agreements in place and obviously they're being a little bit impacted by the economic times and Tradin Organics also. So, the core business that really is applicable to those covenants, we feel, is in good shape.

Okay. And then finally, I'm still -- I know there are a number of reasons that you cited for the margin weakness in the Grains and Foods business. I'm still having a little bit of a hard time reconciling the reported operating income relative to the sales growth, sales were up, I think, 25 million roughly, but the operating profit was down. I mean can you -- maybe I missed some of this in the call, but can you break down kind of the components to reconcile that to where the operating profit should have been relative to the sales growth?

Sure. Well, we talked about some of the sort of non-recurring costs that were going on in that group and that included the costs specific to the Modesto operation. We also talked about -- we are doing the installation of the new equipment and finalizing that at Alexandria, Minnesota, so there were some costs involved there, which rolled through. We took pricing later in the quarter and of course a lot of higher price commodities were being utilized during the quarter. And then most importantly, the third quarter is always the quarter where we close a lot of our positions for the year, we move into the new crop. And John, sort of net cost there would have been over $500,000?

Yeah.

And we kind of hedge that by some of the corporate initiatives to hedge our currency at the same time, but it was really a combination of all of those factors, Ed. And this is the quarter as well where we get down to the bottom of the bins and we know what's in the bottom of the bins and we adjust all of our positions accordingly. So, that was all factored in during the third quarter, as is most third quarters.

And how would you think about the margin progression from Q3 to Q4 in the Grains and Foods business?

Yeah, sure. As I had indicated, we think that we have good grain margins going into the fourth quarter at this stage of the game and beyond. We have completed the commissioning of our Minnesota facility, that's now done. We're producing anywhere from 230,000 to 265,000 cases a week and those volumes are up and we continue to bring on new business. I would expect to see a sequential improvement in the fourth quarter heading back more to the range that we are at year-to-date.

Okay, thanks. And then one final question if I could, just on the FX, you had that one-time gain of 4 point something million, obviously it was offset by some --

Absolutely.

(inaudible) within the segment, but what would that -- if current exchange rates hold, what would that gain look like in the fourth quarter?

If current exchange rates hold, we'd probably have --

It's really hard to say because it has been so volatile because --

As of today we're probably breakeven to plus 500,000.

Okay. Thank you.

Great, thanks.

Thank you. Our next question will now come from Chris Krueger of Northland Securities. Please go ahead.

Hi, good morning.

Hi, Chris.

Hi. I missed the first part of the last guy's questions. Did you go over the strategic review of the non-core businesses and where you're at with that? And if you already went over it, I'll just check the replay, but --

No, I just basically said that, we've taken a look at a number of various options, obviously one of them was to look at the divestiture of the business. But the downturn in that business as quick as it is, we have to stand back and ask if now is the time and quite likely we'll take a pause on that. But we've sort of assessed a number of options and have concluded on where we think we could create the most value, but with the markets, the way they are, it just may not be the time to do that. In the meantime, it's a good business and you know --

Okay. In the Opta Minerals business, if things are pretty tough in the steel, especially the steel-related stuff, if that were to carry in the next year and throughout the year, are there lot of moves they can make on operating expenses there to not be too much of a loss or a drag.

And then Chris we are actually doing that now. This group have always been very adept at adjusting and right-sizing their businesses on a fairly expedient manner. They have a very proactive management group. And so they're in the process of doing that now. This came so fast that -- so they're doing it now. Under normal circumstances, if they'd had a better view into the pipeline, they probably would have been able to do that a little quicker.

Yeah. And if it stayed at these type of -- the conditions remain roughly the same, I mean will it be able to break even next year or would it be a loss, do you think?

No, no, I expect that they'll be profitable.

Okay.

Just not the record profits that they realized this year.

Sure. Okay. In your Canadian distribution, with the price of oil being cut in half, is that having a nice impact at all on all the transportation-related expenses and whatnot?

Yeah, as you saw in the third quarter, I mean that was one of the issues, the prices were way up there. So, we should start to see some of the benefit of that for sure.

Okay. That's all I got. Thank you.

Thanks, Chris.

Thank you. Our next question is now coming from Bob Gibson of Octagon Capital. Please go ahead.

Good morning everybody.

Hi, Bob.

Welcome back. I guess no vacations for you guys.

No.

Too bad. Couple of quick questions, I guess primarily have you given any thought to what 2009 might look like as far as topline or bottom line?

Yeah. Bob, we're going through that whole process right now and of course we're going through that process, seems like we're going through it on a regular basis, just trying to assess what this all means as the economy bounces around. We talked about translation and what do you translate European and Canadian operations into US dollars, I mean the dollar dropped 20% in two months and the Euro as well, so we are sort of struggling with all of that. We're going to have growth, I wouldn't want to comment on the exact number until we really get it nailed down, but there is no reason to believe that our core food operations aren't going to show continued growth. There is just no reason to think that at this stage, that's not what we're seeing from the trends. We are seeing some change in the food trends, we're seeing people shifting away from some of the really high-end, super high anti-oxidant products and more into the, I call them, the center of the plate products. So, rather than buying organic goji berry juice, people are buying organic straw, blueberry type stuff and -- or orange juice and that type of product. So, we're seeing that, but as long as they're consuming it's not a major difference for us. We're seeing consumers shift into the big retail formats versus some of the smaller niche type operations, but we're happy to serve either one of them, so those really are and we're seeing a shift to more private-label products. So, we're pretty confident that we'll see some good growth into next year. As I indicated, we'll provide 2009 guidance first thing in the New Year.

Okay. And I might have missed this, but this professional fee number?

Yeah.

When is that going to end?

It's in a period of decline and it will just keep declining here, as everything gets wrapped up. I'm not going to commit to exactly when it ends because that's just a number, we don't know. But it should get smaller and smaller all the time.

Okay. So there could be some into '09 and --

They will be -- there'll be small, but there'll be little things that go on.

Dribs and draps.

I think it'll be small enough that starting next year we won't be talking about it, it will be at that level.

Okay. And I guess lastly, maybe a little more color on your fruit bar, the machine, what's going on with all of that, how it's running?

Sales are up 100%. That's the good news.

Yeah.

The semi-good news is that, we're continuing to drive improvements off of the system. Our yields are improving. Our new product and our ability to develop and effectively produce some of the new products are improving. Our new Chief Operating Officer, Tony Tavares, is having that group report directly to him. They are doing a lot of work together. We are making good progress at this stage of the game and certainly expect to have this behind us come next year.

So, are you making the funny little shapes?

Right now the major product that we're producing, because that's where the most demand has been, is in sort of licorace style products, the ropes or twists, as people like to call them. We're doing those for a number of people. Behind that comes shapes and peels.

Okay. So, you are producing a lot of stuff, cool. All right, that's it. Thank you.

Thanks a lot.

Thank you. Our next question will come from Keith Howlett of Desjardins Securities.

Hi, yes. I had a question on the forecast for this year, I was just trying to determine what is the three or the nine-month run rate. Is it the number in the supplemental statement of [14].

I said it on the call, Keith, it's $0.18.

I see. So, is that --

$17.55, I believe.

I see. So, the supplemental statement of the 13.5 that's just sort of another number or -- like you've got the supplemental statement where you have the nine-month earnings of 13.5 and I was just trying to determine how does that number of 13.5 relate to your run rate relative to your forecast?

What we had indicated was that in our guidance for the year, our earnings were -- we had estimated our earnings and said we would add back the one-time professional and related fees from the Audit Committee. Okay?

Right.

And so the non-recurring costs, which are now substantial and felt should be disclosed to give you a better insight into the operations, we never ever indicated that we would be adding those back for guidance purposes. Okay, so what I had indicated when I went through is that the 13.5 is with all of those one times backed out of there, but for guidance purposes we weren't taking the non-recurring numbers. So, when I went through, I indicated that our earnings were $11.336 million.

Okay.

Before the non-recurring costs. So, the number that we would have been guiding upon was $11.336 million or $0.18 per diluted common share. If you add back then those non-recurring items, you would get to 13.491, the number that you are referring to.

Great. Thanks. Well, that's great. The next question that is, your forecast implies earnings in the fourth quarter of $0.01 to $0.05, I guess it is.

Yes.

And you know which seems very light -- well, seemed light relative to what I was expecting. I mean is that -- is Opta Minerals expected to post a significant loss or -- and I know there is the foreign exchange in distribution, but is there something behind schedule in the other divisions?

No. This is Opta Minerals posting a loss and the loss -- sort of the reduced earnings that we get just from translating a number of the non-denominated businesses.

Right. Okay, great. And the -- so the Opta Minerals, I know they've got a call tomorrow, but we should anticipate that they will struggle in a similar manner subject to some reduction of their cost structure in the first half of next year, is that the way you're looking at it or --?

Yes. We are, Keith.

And then just --

Not everybody goes out. And I encourage everybody to go to your car dealer and buy a car immediately and use up some steel.

Yes, I encourage that also. It's pretty desperate out there. And then just had a question on the cash flow statement. The two items related to the unrealized loss on foreign exchange and the foreign currency contract, are those the after-tax impact of the $4.345 million that's mentioned in the text or is there anything else?

Those, Keith, are just foreign exchange gains that haven't been turned into cash yet, so they relate to some debt denominated in Euros, but basically we benefited from the depreciation in Euros.

Both of those relate to the Euros? There was one called forward foreign currency contracts and there is one called unrealized loss --

The other amounts are just amounts of cash that were received in October. (inaudible) realize is amounts that are more long term in nature and the other component is just cash, it will be kind of like a receivable. Just cash that we will collect or have collected in October.

These are --

It's broken out from -- it's just because of its significance, it was broken out from non-working capital items. It's really more like a non-working capital item.

Oh, I see. It's not really an operating item.

Right.

I see. Okay. And in terms of the -- my understanding is that going forward instead of the $4.3 million foreign exchange gain that we had this quarter, that you think it might -- and I know this is bit of a shot, but in response to the prior question, it's about $0.5 million in the fourth quarter, do you think --

No, what we said is that, right now based on what we know today, which -- The Bank of England dropped interest rates a point and a half today, so I don't know what that will mean. We think we'll be between zero and 500,000.

Versus the 4.3 in this quarter?

Yeah.

Right. Okay, great. Sorry. Each day is different, that's for sure.

That's my point, yes.

Great. Thanks very much.

Great. Thanks, Keith.

Thank you. And our next question will come from William Dittl of the Gato Group. Please go ahead.

Hey gentlemen, good morning.

Good morning, William.

Just on the doubling of the Okara output that you guys are going to see from the Modesto facility, do you guys kind of see that as being beneficial for grain margins going forward and you guys have a market for all that Okara?

Okay, you're talking about the byproduct Okara?

Yeah.

Yeah. Our plan right now, William, obviously the drying facility that we've developed is located in Minnesota and there is no human possible economic way that we could ever haul the Okara to the new -- to that facility to dry. It's just too far, we'd burn off more gas than any of the economic impact. At this stage of the game, there is a market in California for the Okara, just in the form that it comes off the line at for some feed applications. So, in the first phase of the project, we're not going to invest in the actual drying of the Okara, but sell it in its sort of raw form and then we'll be looking at drying the Okara probably in the second phase of the project.

Okay.

The Okara side of our business is going extremely well. As you'll recall, we implemented the dryer in -- it's going really well and not so well. Unfortunately, we had a sort of a malfunction in the dryer that's had us down for a while, but we'll be back in business here. We haven't shorted any customers, but we've been able to move the Okara from feed applications into food applications, and the Okara is now being used in a number of food applications by very large food manufacturers. So, that's going quite well for us, it's been great to turn a waste product into a value-added organic product.

Okay. And I noticed that baby food is really looking -- going to be like a really strong driver for organics coming up here. Are you guys -- do you have every intention of exercising the purchase right of Baby's Best in March of 2009?

Well, Baby's Best interestingly enough -- don't be tricked by the baby, really it's just the name of the company. They produce fruit purees and fruit purees are used in all types of applications from buyers through various food ingredients and also in baby food. So, we continue to -- so a lot of ingredients into baby food. Baby food is one of the faster-growing categories in organics because people when they convert to organic like to convert, have their children at young ages eat organically to remove the pesticides and the GMOs from their diet. So, I think that baby food remains a very good category for us and we serve a number of people in that business. The Baby's Best relationship has been a difficult one and I wouldn't comment one way or other on whether or not we'll exercise in 2009.

Okay.

We'll continue to do business in one form or another and continue to serve the baby market industry.

Okay. Yes. It's starting to in terms of growth through 2010, I think you guys are pretty much online. Organic Trade Association says 18% growth through 2010, some of the retailers up in Canada are showing really significant growth. Moving over to BioProcess, after initially co-authoring some of the cellulosic ethanol legislation, our new US President-elect is intending to fund 220 cellulosic ethanol bio-refineries at the rate of $15 billion per year for 10 years.

Yeah.

Because Congressional support is so strong bipartisan wise, how do you guys intend to pursue the funding?

Well, obviously we will find out exactly how these funds are going to be allocated and we will be aggressively pursuing all of those opportunities. We think that the new President's initiatives speak very well for the opportunities for BioProcess.

Okay. And just kind of taking a look at the industry, we're seeing some consolidation here. We're seeing some pressure on margins with some of the corn ethanol producers especially recently. And just looking at some of the bigger strategic partnerships, we have DuPont and Isco, we've got Chevron, Weyerhaeuser. Would you guys consider a strategic partner of considerable size, given the environment that we are in and maybe long-term development there for commercial application?

Yeah absolutely, William. And quite frankly it's one of the items that we've worked on through our strategic review of that business and yes, we would and we are.

Okay. Great. Thanks very much, guys.

Okay. Thank you.

Thank you. Our next question will now come from Ronald Emmerman of RMC Group. Please go ahead.

Hi, Steve.

Hi, Ron.

First, it's SunOpta's benefit that your continued services will be with the company and I applaud the people who made that decision. Steve, in view of the economic pressures that the world is experiencing, what kind of resistance are you getting in China, increase your prices, especially with your private labeling?

Well, Ron, I have to coach all of this because it changes quite rapidly, but we went through an extensive period of increased pricing that we -- from commodity prices through natural gas, fuels and oils and it's impacted us as we went through the year. We've been pretty good at passing those prices along, but it was always a drag that you do experience. We have that bulk of the pricing that we are taking in place. Over time, we'll see how the consumer reacts to that pricing and obviously there is a lot of price pressure coming to consumers. But at this stage of the game, retailers have passed that pricing through because those are the realities. We haven't seen a massive slowdown in consumers' desire to have natural organic foods, but what we have seen is a shift in their channels and shift some of the products around, as I mentioned earlier. So, it's an ongoing dialog everyday. Interestingly enough though, retailers have been looking for private-label options because they get a lower cost option onto the marketplace -- into the marketplace. So, when we're going out there even though the costs are higher, normally a private-label offering can be a little less expensive than many of the brands. So, that works and of course with good volumes on those products, you can get quite efficient and offer some very competitive pricing.

Okay. On a different subject, regarding the -- did I hear correctly regarding Abengoa, there could be a decision made in December?

The arbitrator has indicated that he will be ready to rule by December 1st, but -- so call that December.

Could you expand as to what's involved in terms of dollar amount?

Sure. Keep in mind that we wrote off $3.3 million at the end of last year on our contract on amounts that were receivable. What we're asking for is to be paid for the equipment that we delivered net of what we can take back and utilize on other projects. So, that's the amount that we're trying to recover.

So, if you're totally successful, am I led to believe that $3.3 million will come to you in cash?

Yes, we'd hope we could also recover the legal fees, but we'll --

Okay. And then because you said you've written this off, this receivable off, I take it that of that hopefully successful conclusion will all come down into income in the fourth quarter?

Yes. I don't want to jinx myself, but that would be the -- that would be the conclusion, the happy conclusion.

Okay, thank you. Continued good luck.

Thank you, Ron.

Thank you. And our next question will now come from [Ron Rubin] of [Rubin Capital Investments].

How are you doing, guys?

Good morning.

In regards to the China Resource and Alcohol contract, is there anything -- any type of update that you can give us? I mean, I know you mentioned last quarter that you hope to get it prior to the end of the year, but obviously have there been any new developments?

The actual project that we hope to get before the end of the year in China was in China -- was in Cosco.

Okay.

It's another potential application over there. We're also continuing to work, Cosco are running the pilot system and continuing their development work and discussions are ongoing as to the next steps for them.

Okay. I mean have they mentioned any resistance or maybe taking a step back as far as what their original plan was to do with you guys because of the economic environment?

I haven't heard much for an economic environment situation from China. So, no, I don't think the economics are -- I don't think that's the issue there.

Okay. Now as far as the Abengoa lawsuit, you mentioned that you wrote off about $3 million and you hope to get the legal fees back. Do you have an estimate of how much legal fees have accumulated to at this point?

Well, as I indicated, we spent $400,000 in the quarter. So, you can assume that it's probably -- how much have we spent on the Abener?

Somewhere half.

About $0.5 million so far.

And I mean to spend $0.5 million to get $3 million, I mean do you -- I guess I'm assuming you are very confident you'll get the $3 million or is spending that much money on the lawsuit really more for future protection rather than just getting the money itself right now?

Yeah, Ron, we just think that there is a time and place where you need to defend yourself and this is one of those situations for a number of reasons and we hate to spend the legal fees, but feel that it's absolutely the right thing, especially given the fact that it was also an ongoing litigation in the US with regards to patents, right.

Okay.

So, yeah, we do think it's the right thing to do.

All right. And the next thing as far as the shareholder plan that you mentioned earlier in October, I guess was there anything that specifically drove you guys to go to that extent, I mean there is --

Well, yes. The Board -- Ron, the Board met and just felt at the time and situation has changed a little bit, but at the time the company was trading at multiples that were kind of at the lower end of the peer group and also obviously very low compared to anything that the company have traded at in the past period of time and they felt that it would be in the shareholder's best interest, to make sure that there is a plan in place that really allowed anyone who wanted to bid for the company to do so in an organized manner, a permitted bid. The only two provisions on a permitted bid are that if somebody wanted to buy the organization and clearly it's the Board -- the Board has to do whatever it needs to do in order to maximize shareholder value and protect the interest of shareholders. That if anyone wanted to bid for the company, there's no problem, you just have to bid for all of the shares of the company and treat all shareholders equally and the Board would get 60 days to respond rather than 45 days to respond to that bid and then with an additional 15 days based on certain provisions. That's all that it was. In the event that an unsolicited bidder wasn't acting in the best interest of all the shareholders, there would be a right assigned to the balance of the shareholders where they could dilute that party if it wasn't in the best interest and the Board would have to make a decision on that. So, it's in there. It's for the best interest of the shareholders. Hopefully it never has to be utilized, but it's there in the event that there was some sort of an event that the Board felt was in the best interests to act on.

Okay.

Yeah. Thanks, Ron.

Thanks a lot and have a great fourth quarter.

Yeah, thanks. You take care.

You too.

Thank you. Our next question will now come from [Steve Kruger] of [Foresight Investing]. Please go ahead.

Good morning.

Good morning.

In 2007, the Department of Energy announced six commercial scale bio-refinery projects that they're going to be investing almost $400 million in. And then in 2008 early this year, they announced another four small-scale bio-refinery projects for another $100 million or so.

Yeah.

I think one of or two of the six commercial scale have been canceled, but there's still eight or nine projects representing the investment by the DOE of almost $500 million. Which of those projects plans to use the pre-treatment process of your BioProcess division?

Well, you are right, the two have been canceled, or two have backed away and my understanding right now is there may be a third that's backing down and the projects that are existing from the original -- the original round of financing, I believe, are using different -- if they are not on the sugar platform, they are using different processes, gasification and that type of thing. So, my understanding on the first round is that none of those use our technology.

On the six commercial scale, how about the four small-scale projects?

I don't know.

One of those is specific. Three of them are using biochemical, so --

Right, yes. That's why -- I would say probably none of those.

So, with such a large investment made by the DOE and you are not involved in any of those. What's your basis for saying that interest is strong in your pre-treatment process?

Well, there are a lot of organizations that aren't looking for a DOE funding from petrochemical companies through food -- not food manufacturers, but manufacturers that are processing sugar. Many, many companies interestingly enough, Steve, aren't pursuing that type of grant money for a number of reasons. One of the things that we're seeing is that it's one thing to get the grant, it's another thing to be able to utilize those funds. So, there are many organizations out there that aren't part of that group of nine.

Can you give us any more visibility as to what significant projects are planning to use the BioProcess pre-treatment?

Sure. I have talked about the fact that there are a number of projects in China right now that we have been working on and hope to bring to conclusion.

Are any of those at this point -- have any of those decided to move to commercial scale with your process?

None of them are at commercial scale, but they are above pilot scale and they are sort of into the commercial demonstration level.

And then it's Verenium I know there, how about any other?

We have a project going on in Minnesota, which we have talked about. I only want to talk about the ones that we spoke of. Central Minnesota Ethanol Co-op and the potential utilization of the technology there. We had discussions with companies in India wanting to use the technology in a number of applications. So, there is a good amount of interest.

So, China is just furthest along?

I would say China is furthest along in the next sort of step.

And what information, data or evidence do you have from China that you can -- they can produce cellulosic ethanol at a competitive cost?

Well, I don't think anybody can produce cellulosic ethanol today at a competitive cost, especially at the volumes and size that the operations are running out. These are all -- if I can, Steve, these are all a step on the road to getting to competitive costs. First, you are at pilot scale and then you are at commercial demonstration, then you get to commercial scale, and then you scale from there. So, I think we are in the process of seeing that unfold. But I would say right now nobody is in a position where they're economically competitive today.

Okay. Thanks, Steve.

Okay. See you, Steve.

Thank you. Our next question will now come from [Ron Park], Private Investor. Please go ahead.

Good morning.

Hi, Ron.

Hi. Can you describe the interviewing process that took place for a new CEO and were any offers extended before the decision was made to bring you back?

Sure. It's Jeremy Kendall. The answer is that no -- no offers were made for a CEO. For the CFO, the process involved forming a committee of the Board to do the search, the definition then of the job in some detailed discussions and followed by an analysis of a number of search firms, the selection of an international search firm, advertising throughout the country. And in the US, the identification of a long list, a short list, interviewing of the top eight people -- sorry, identification of eight people, review by the committee of the top eight people and selection of four for interviewing, those interviews have been completed, second round interviews are underway as we speak. And hopefully a decision would be reached within the next two weeks.

Can you provide some color as to what led to the reversal of the decision and the decision to bring Steve back?

Well, sure. I think Steve has demonstrated enormous responsibility in actions since this particular problem was identified back in January of 2007. He has, as I say, stepped up and taken responsibility. He moved immediately to make corrections in the operations, renouncing and moving towards profitability. He has total support throughout the company of all the senior management group. He has total support from our banking group, which is again very important in today's environment, obviously overwhelming support from shareholders. So, we really felt that he was the best man for the job and that's why the decision was reversed.

About the time that you took the original Audit Committee recommendations, you also announced there was going to be a slowdown in acquisitions, does that continue to be the case or has that changed as well?

No, that is still true. We have made a number of very small acquisitions that Steve talked about, such as the sesame seed operation in Ethiopia, the coffee operation in Holland, and these are very, very small acquisitions. We've also bought an operation that is supplying organic products from Guatemala into Central America, again these were very small acquisitions. And so, where we have an opportunity to tuck something in like that, that's directly allied with our business, really it's just an extension of our existing business. We are looking at that, but the answer is we're spending absolutely nominal amount in there and not spending a lot of time on it. We're seeing tons of things, I might say. I mean there are tons of things coming in the doorway, we frankly expect that within -- over the next year or so as life continues in this somewhat erratic way that there will be even greater opportunities for acquisitions, but at this particular point in time our focus is entirely now on improving our profitability, raising our gross margins, integrating our business.

Moving on to BioProcess, you had previously indicated that you thought you would have a China contract signed by now. Can you describe the way and where things actually stand?

The answer is that, we do still expect that contract to be signed imminently. And the only thing that had been waiting with is that they had to get an environmental review of the site and that requires -- it has all been approved, but they haven't got the actual certificate yet. And I guess they go daily to the Ministry to seek that certificate. But they anticipate it very shortly, at that point in time our Executive VP of that division will immediately go to China to finalize that contract and sign it. That's our [anticipation].

And the CMEC feasibility study, I believe the timeline previously given was December. Is that still when you expect it to be completed or has that changed?

You are talking about the second phase?

Phase II.

Phase II, no it goes on until May, June of next year.

Okay. If the results of that feasibility study give you a green light, can you give a blueprint for what happens next?

Well, sure. Assuming that we have the green light on the feasibility study, we'll review the financing options, the funding options to one of the questions earlier, what money is going to be available from the government, etcetera. So, it would be financing and the lining up the joint venture partners to move ahead with that.

Do you have a target for when you would hope to break ground or is that too early to say?

I think it's a little bit too early to say. I mean we would want to move relatively quickly, but we also have to pay attention to --

We wouldn't fund any start up until at least the end of 2009.

You talked a little about Verenium with the Jennings plant. Can you talk about discussions you may have had with them given their new partnership with BP?

No, we haven't had any specific discussions other than that -- obviously they've got a great partner with them who isn't in this to build one plant and stop there. So, that's good news for us and obviously we want to be a key supplier to their future endeavors.

It's a complicated plant and it's not our equipment, it's slow in start-up and it's not our equipment that is delaying that in any way.

Is there anything new to report regarding your discussions with various oil companies?

Nothing new to report.

Okay. And last question, where does the Genuity Capital review of ways to increase shareholder value stand?

Okay. So, as I'd indicated earlier Ron, we have completed -- essentially completed the bulk of the review on our non-core operations and we assessed a number of different options on unlocking shareholder value for Opta Minerals. Obviously with the downturn in Opta Minerals given the economic environment out there right now, that's going to delay -- slow down, if you will, some of our initiatives in that regard. In the meantime, it's a great -- it's a very good business and we're happy to have that opportunity in front of us. And on the BioProcess side, we've done a lot of work around likely candidates in partnership arrangements and we are working on those.

Thank you very much.

Thank you.

Thank you. At this time, I would like to turn the call back over to Mr. Bromley for closing remarks.

Great. Thank you very much. Once again, I want to thank everyone for joining us on the call today and thank you for your interest in the company, and as always encourage you if you have questions that you would like to address, feel free to call and we'll get back to you. Hope everyone has a good day. Thanks.

Thank you. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for participating and at this time, we ask that you please disconnect your lines. Have yourself a great day.