If any further evidence was needed that Viterra is not just a grain handler, the company’s 2009 financial results provide it.
Despite shipping 15 percent more grain in the fiscal year ending Oct. 31, 2009, the company’s net earnings for the year declined to $113.1 million (45 cents per share), down 61 percent from $288.3 million ($1.31 per share) the previous year.
The company attributed the sharp drop to lower commodity prices, especially fertilizer prices and margins, which were down substantially from 2008.
It described the net earnings as a “good result” in a year in which the industry experienced dramatic changes in fertilizer pricing.
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Viterra’s share price on the TSX dropped by 55 cents to $10.05 on Jan. 21, the day the financial results were released. As of Jan. 25 the price was $9.85.
Earnings before interest, taxes, depreciation and amortization (EBITDA), a key measure of a company’s financial health, were $323.7 million, down from $532.6 million a year earlier.
Sales and other operating revenue totalled $6.6 billion, down from $6.8 million in 2008.
The final quarter of the fiscal year generated sales and other revenue of $1.4 billion, down from $1.7 billion, due primarily to lower commodity prices.
The fourth quarter produced a net loss of $920,000, compared with earnings of $46.8 million a year ago.
Chief executive officer Mayo Schmidt said 2008-09 was a defining year for Viterra.
“We significantly broadened our global presence through the acquisition of ABB Grain Ltd. in Australia,” he said in a statement released with the financial results.
“We executed a $1.4 billion transaction and, as promised, retained a very strong capital structure with over $1 billion of cash and short-term investments on our balance sheet.”
Schmidt said the company has $800 million available for future growth initiatives.
“We completed the year as a more geographically diverse company, yet we maintained the financial stability that has become our hallmark.”
The biggest drop in earnings came in the company’s agri-product segment, which recorded EBITDA of $4.5 million, down from $44 million in 2008. Fertilizer sales totalled $103.8 million, down from $228.1 million.
Record high fertilizer prices in 2008, along with soft grain prices, prompted many farmers to buy less fertilizer. The company said it expects that to turn around this year.
Viterra’s Australian operations contributed a net EBITDA loss of $6.2 million for the period from Sept. 24, 2009, to Oct. 31, 2009, reflecting the seasonally slow pre-harvest period in that country.
Schmidt said the company expects to see a solid recovery in the Australian business in 2009-10, with grain receipts already exceeding expectations.
Viterra is using $300 million of surplus cash to reduce the short-term debt of its Australian operations, resulting in interest expense savings of $1.3 million per month.
He said savings from the takeover will total $30 million, with the full benefit to be seen in 2012.
Market analyst Hari Sambasivam of National Bank Financial said despite the big drop in earnings in 2008-09, he is optimistic about the company’s prospects for the coming year.
That’s based on projections of increased volumes and profitability on grain handling and improved results in agri-products due to fertilizer.
He said any decline in Viterra stock value would be a good entry point for patient long-term investors.
He retained a target price of $12 a share and a stock rating of “outperform,” which means the stock is expected to outperform similar companies in the same sector over the next 12 months.
