When Victor Rice, 38, became president of Massey-Ferguson Ltd. a year ago, he predicted that the huge but ailing farm implement maker would break even this year.
At that time, Massey was on its way to about $250 million in losses -- the largest one-year loss ever in Canadian business.
But a year later, the chartered accountant's prediction seems likely to be achieved.
Today, Massey is on its way to improved financial health. A financing plan to raise between $300 million and $500 million and reduce Massey's mammoth debts has been announced.
Argus Corp. Ltd., the controlling Massey shareholder, will take $100 million of new Massey convertible preferred shares, with the balance of the financing to come through other preferred share sales.
With Rice at the helm, the company recorded a $3.3 million profit from operations in the third quarter ended July 31, compared with a loss of $25.8 million in the corresponding 1978 period.
Massey reported a final profit for the quarter of $53.8 million after taking into account three nonoperating items -- a tax credit of $95.4 million, reorganization expense provision of $18.7 million and a foreign exchange loss of $26.1 million.
On an operating basis, the company lost $13 million in its first quarter and broke even in the second quarter.
Massey is much better off than a year ago. After absorbing huge write-off provisions and operating losses, it showed a loss in the year-ago nine months of a staggering $145 million. This year it showed a profit of $62 million for the nine months.
Some observers say the tractor and farm machinery business is cyclical, but Rice denies it. "The only thing that's cyclical is Massey's profit," he said.
Rice is careful not to blame former management for the company's woes, but he is clearly not satisfied with past performance.
In an industry where the top 25 percent of producers earn a profit of about 5 percent on sales, he said Massey reached this level of profitability twice in the past 37 years.
Some of Massey's problems stem from its role as a worldwide manufacturer, with operations in Brazil, Iran and West Germany.
Massey operated an Iranian plant in a joint venture, but the Toronto-based company no longer owns shares in the operation. "We got out at zero cost," Rice said, while many other companies operating in Iran have suffered heavy losses.
But the market in Iran has not dried up for Massey. It recently got an order for 2,000 complete tractor kits to be assembled abroad. "We don't own a share in the plant, but we got the sale and the production profit stays in Canada," Rice said.
The West German subsidiary, Hanomag, a producer of construction machinery, lost $50 million last year. Rice said its loss this year will be cut to $10 million, and reaching the breakeven point or better is possible next year.
How was the economic miracle of a turnover in Hanomag achieved? Rice said it was simple: "I put one man in charge, and he is working hard."
Massey has been trying to sell Hanomag for years -- it couldn't shut it shown because of West German laws that would require tremendous payments to terminated workers. But now that the company is approaching the break-even point, a buyer might be found.
Massey has been doing well selling its moderate-sized under-100-horse-power tractors, and holds about 20 percent of the North American market.
But in the key category of more than 100 horsepower, the high-priced machines used on big farms, it is well behind its two major U.S. rivals -- Deere & Co. and International Harvester Co. -- with 5 percent to 7 percent of the market.
"Deere has 35 percent of the market and will always have 35 percent," Rice said. "But all the rest of it is there for us to improve our share."