Canada’s largest grain handler last week reported third-quarter earnings of nearly $121 million, down from $167 million year-over-year.
For the first nine months of the year, Viterra Inc. posted profits of $114 million, down from $241.5 million the same time last year. This includes a write-down of $28.1 million on fertilizer inventory in the first quarter and a $9 million loss on asset sales.
Viterra chief executive officer Mayo Schmidt told analysts and reporters on a Sept. 11 conference call that results for the quarter ending July 31 illustrate the company’s ability to execute even in challenging times.
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“We generated solid earnings in the third quarter,” he said. “We handled near record volumes.”
Sales and operating revenue for the quarter was $2.2 billion, pushing year-to-date revenue to $5.2 billion.
The profit represents 51 cents per share, compared to 71 cents for the same quarter last year.
The company’s grain handling segment performed well through the quarter, as shipments hit 4.7 million tonnes or almost one million more than the same quarter last year. Year-to-date, the company has moved 13.1 million tonnes, compared to 11.1 million tonnes last year.
Schmidt said the company reached its grain handling margin target.
“Our expectation for margins in the grain handling segment were in the $25 to $26 per tonne range,” he said. “On a year to date basis, we have achieved $26.02 per tonne and we remain confident with that level as we move through the final quarter of the year.”
Margins were much higher this time last year at $32.49 per tonne but Schmidt described that as unprecedented.
The weather and fertilizer prices affected third quarter performance for Viterra’s agri-products division. Revenue was down $71 million to $939 million.
Schmidt said Viterra is not immune to global supply and demand fundamentals.
The company sold 757,000 tonnes of fertilizer, or 15,000 tonnes less than the third quarter of the last fiscal year. However, volume for the first nine months is 1.3 million tonnes, which is similar to last year.
“It has been the margin that has temporarily suffered,” Schmidt explained. “Much lower fertilizer margins reflect negative margin sales and very little in-season appreciation, particularly with phosphate fertilizer.”
The late, cool spring and drier growing conditions reduced demand for pre-seed and crop protection products.
Doug Wonnacott, senior vice-president of agri-products, said the company expects fertilizer sales to pick up this fall. Prices have dropped significantly and he said farmers appear interested in purchasing dry fertilizer and storing it.
Port terminal receipts were strong. Viterra took in 3.1 million tonnes at its terminals, driven largely by record volumes at Vancouver.
Food processing sales were up, year over year, by $7.8 million, reflecting sales from the canola crushing facility at Ste. Agathe, Man., which was purchased in the first quarter.
Feed sales were down by $33 million due to challenges in the American dairy and Canadian swine sectors.
Viterra’s market share reached 45 percent by the end of the quarter, up two percentage points.
Schmidt said the completion last week of the deal to acquire ABB Grain Ltd. of Australia is a “transformational move” that will bring new value to shareholders.
Investors did not seem troubled by the company’s financial results. Shares closed up 25 cents at $9.86 on Sept. 11.
