CALGARY, ALBERTA, CANADA — Viterra Inc. announced on Sept. 6 a 10% drop in profit for the three months ended July 31, due to a one-time income tax item. Net earnings decreased 10% to C$111 million (30¢ per share) compared to C$123 million (34¢ per share) in the same quarter last year after the company recorded a one-time income tax item of C$31 million and C$21 million in the costs associated with the early redemption of company bonds.
Viterra reported EBITDA for the quarter of C$288 million, an increase of 15% compared to the C$251 million in the same quarter of 2011.
"Viterra once again achieved impressive quarterly results," said Mayo Schmidt, Viterra's president and chief executive officer. "For the year our Agri-Products business segment has delivered record results. Our Grain Handling and Processing business segments have also performed well. I am very pleased that our Viterra team remains focused on strong operational performance while we work to complete the transaction with Glencore."
The Agri-Products segment improved its quarterly results over the prior year due to strong fertilizer pricing, the new fuel business in Western Canada and higher crop protection product sales. Favorable weather across the Canadian prairies and strong commodity prices led to higher canola and overall seeded acreage which supported increased demand for agri-products. The segment achieved EBITDA for the third quarter of C$195 million compared to C$163 million from the same period last year, and year-to-date achieved record EBITDA of C$273 million. Fertilizer margins increased during the quarter to $187.44 per tonne (2011 - C$143.92 per tonne), bringing the year-to-date margin to C$157.74 per tonne (2011 - C$126.46 per tonne).
Grain Handling and Marketing's EBITDA was C$103 million in the third quarter versus C$106 million in the same period last fiscal year. During the third quarter, lower global shipping volumes were offset by stronger grain handling margins and solid results from the Company's international grain marketing activities. On a year-to-date basis, the consolidated global pipeline margin increased to C$39.54 per tonne compared to C$36.80 per tonne a year earlier.
The Processing segment's EBITDA for the third quarter improved to C$31 million compared to C$28 million in 2011. Improved results from canola, malt, and oats were in part offset by the pasta operation, which is experiencing competitive pricing pressures. The food processing margin for the third quarter decreased to C$108.03 per tonne compared to C$120.77 per tonne last year due to lower pasta margins and a change in product mix as there are now more canola volumes given the new crush facility in China.
On a year-to-date consolidated basis, EBITDA was C$662 million compared to C$590 million in the prior year while net earnings were C$256 million (69¢ per share) versus C$254 million (68¢ per share) in the corresponding period of fiscal 2011.
Across the Canadian Prairies, harvest is in the early stages, with above average yields and quality. This should continue provided favorable weather continues through the duration of harvest. According to Statistics Canada's August 22, 2012 field crop reporting series release, western Canadian production of the six major grains is predicted to be 55.5 million tonnes. This represents an increase of 13% from the 49.3 million tonnes produced in the 2011 harvest and an increase from the 5-year historical average production of about 53.0 million tonnes. Statistics Canada is also estimating an additional 3.3 million tonnes of lentils and other crops. The quality of the crop in Western Canada looks promising but is dependent on favourable harvest weather for the next couple of months.
In South Australia, seeding finished in late June and good growing conditions exist throughout the majority of the state. The Australian Bureau of Agriculture and Resources Economics and Sciences ("ABARES") is predicting that the current crop will produce 6.9 million tonnes. This represents a 12% increase from the 10-year average for the state. Crop quality in the state is good at this time. Approximately 85% of the crop is currently expected to be wheat and barley.
For fiscal 2013, assuming production estimates hold, Viterra anticipates CGC receipts for the six major grains in Western Canada to be in the 33 to 35 million tonne range, which is higher than the 32 million tonnes that is typically available.
For Viterra's South Australia grain handling operations, the Company expects shipments to be strong for the remainder of the year given the volume of grain in its system and ongoing solid demand from key export markets. To complement the 6.6 million tonnes received into the Company's system during the first nine months of fiscal 2012, there was approximately 1.8 million tonnes of carry-in stocks from fiscal 2011. Viterra currently estimates carry-over stocks into fiscal 2013 to range between 0.7 million and 1.0 million tonnes.
Fundamentals for the Agri-Products segment are expected to remain strong in the last quarter of fiscal 2012 due to relatively strong commodity prices that should continue to drive solid returns for producers and their demand for crop inputs. Viterra is increasing its fertilizer margin guidance to C$140 to C$160 per tonne for fiscal 2012 from its previous guidance range of C$120 to C$140 per tonne. Strong agri-commodity pricing, increased seeded acreage in Western Canada and higher nutrient requirements from excess moisture in the last two years have supported strong fertilizer demand in fiscal 2012.
The company believes the long-term fundamentals for this business are solid despite some short-term challenges in its pasta and New Zealand feed operations. The pasta operation is experiencing competitive pricing pressures while good pasture conditions in New Zealand are reducing demand for feed. Viterra maintains its annual guidance range of C$90 to C$110 per tonne for its food processing operations in fiscal 2012.
On Aug. 27, Viterra provided an update regarding the status of regulatory approvals of the proposed acquisition of Viterra by Glencore International plc. ("Glencore").
While the closing of the transaction remains subject to the satisfaction or waiver of all applicable conditions, the sole remaining regulatory approval is the approval of the Ministry of Commerce of the People's Republic of China ("MOFCOM") under the Chinese Anti-Monopoly Law.
Glencore continues to engage with MOFCOM to ensure approval as soon as possible. Viterra and Glencore will update the market in due course when they expect closing of the acquisition to occur.