Viterra's third-quarter earnings up on agri-products

by World Grain Staff
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CALGARY, ALBERTA, CANADA — Viterra Inc. announced on Sept. 7 that net earnings for the nine months ended July 31 were up 176% to C$256 million or 69¢ per share versus C$93 million or 25¢ per share in the same period last year.

Earnings for the third-quarter almost doubled, increasing to C$123 million or 33¢ per share, compared to C$64 million or 17¢ per share for the same period a year ago.

Viterra said the third quarter increase reflects strong contributions from its agri-products operations and solid performance from its grain handling and processing operations. Favorable weather across the Canadian prairies resulted in good growing conditions for this year’s crop and, when combined with healthy commodity prices, motivated growers to invest in agri-products, the company said.

"Viterra has consistently delivered strong financial results for the first nine months of this fiscal year, far exceeding our earnings last year,” Mayo Schmidt, Viterra's president and chief executive officer. “Operationally, we also continue to perform well and in South Australia Viterra recently set a new record for grain shipped through our ports. We continue to strengthen our operational performance around the globe, which is generating higher returns for our shareholders. Looking forward, there is a lot of opportunity for Viterra with a promising harvest in both Western Canada and South Australia, and strong market fundamentals supporting our agri-business. To capitalize on these opportunities and drive value through our integrated worldwide pipeline, Viterra implemented a new global operating model around our three business lines of grain, agri-products and processing. This new model will strengthen and support our strategic vision now and into the future as Viterra continues to provide key agricultural ingredients to a growing world."

Grain handling and marketing's revenues increased due to higher commodity prices, a more established international grain group and higher Australian receivals and shipments following a record crop in South Australia.

The segment generated C$104 million in EBITDA for the quarter compared to C$101 million in the third quarter of last year. On a year-to-date basis, this segment's EBITDA was C$424 million compared to C$284 million a year earlier. The majority of the increase relates to Viterra's Australian operations that contributed C$220.7 million (2010 - C$129.0 million) for the first nine months of the fiscal year due to record receivals, shipments and additional storage and handling revenues. The remaining increase is attributable to strong results from the North American team and from the international grain group which has generated year-to-date EBITDA of C$41 million, after a solid third quarter contribution of C$9 million

Agri-products' revenues increased as a result of robust fertilizer contributions and processing's revenues increased due to solid contributions from the pasta and oat processing businesses, which were purchased in the latter half of fiscal 2010. EBITDA increased over 50% in the third quarter to $162 million compared to $106 million in the corresponding period a year earlier. These positive results were driven by robust fertilizer contributions and timing differences as a result of the late seeding in North America that moved earnings from the second quarter into the third quarter. Fertilizer contributions were robust as market fundamentals continue to support strong demand and pricing.

The Processing segment's EBITDA was C$29 million for the third quarter compared to C $22 million in the same period last year. The increase was due to the new oat processing business purchased in the fourth quarter of last year and stronger pasta margins. Viterra's North American food processing contributed C$23 million (2010 - C$17 million), while the company's Australian malt and global feed operations contributed C$6 million and C$1 million, respectively. On a year-to-date basis, the segment's EBITDA was C$93 million, compared to C$68 million a year earlier. Year over year, the new pasta and oat processing businesses added C$35 million while the Company experienced weaker results from canola processing and feed operations due to short-term challenges in both of these industries. Year to date, the Company's Australian malt operations have contributed C$23 million to EBITDA, which is on par with the previous year.

Viterra remains optimistic that the industry will see relatively strong volumes through the remaining portion of the fiscal year and into fiscal 2012, particularly if weather conditions are favorable into the fall. Strong demand and robust prices are expected to motivate farmers to actively market their grains through the next crop year. The Canadian Wheat Board ("CWB") is forecasting an export target of 18 million tonnes of wheat and barley out of Canada for the upcoming crop year compared to 15.8 million tonnes for the 2011 crop year.

For Viterra's South Australia grain handling operations, the company expects shipments to remain strong into the last quarter of the fiscal year given the significant quantity of grain previously received into the system, the favorable commodity price environment and strong global demand. To complement the 8.5 million tonnes received into the company's system during the first nine months of fiscal 2011, there were approximately 1.2 million tonnes of carry-in stocks from fiscal 2010. The company currently estimates carry-over stocks into fiscal year 2012 for the company's Australian system to range between 1.7 and 2 million tonnes, up from last year due to the record crop produced in the state.