Viterra’s chief executive officer didn’t adopt false modesty when describing his company’s 2007-08 third-quarter results.
“Our financial performance has been exceptional,” Mayo Schmidt said during a Sept. 10 conference call with market analysts and reporters.
“It has been an exceptionally busy year. Viterra’s products are in great demand.”
The numbers for the three months ending July 31, 2008, back up those statements.
The company reported a profit of $166.7 million (71 cents per share) on sales and revenue of $2.2 billion.
In the same period last year, the company had net earnings of $98.5 million (58 cents) on sales and revenue of $1.4 billion.
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That brings profits for the first nine months of the 2008 fiscal year to $241.5 million ($1.13), up from $115.7 million ($1.05) the previous year.
The results reflect a number of factors, including strong grain handling margins and market share, increased fertilizer sales and margins, strong seed sales and additional capacity and earnings associated with the acquisition of Agricore United by Saskatchewan Wheat Pool in April 2007.
The company garnered a dominant 45 percent share of the western Canadian grain handling market in the quarter (43 percent year-to-date).
“That is solid evidence that we are providing the competitive pricing and values that our farm customers have come to expect,” said Schmidt.
The company also reported margins of $34.47 per tonne of grain handled in the quarter, reflecting system efficiencies and increased revenue from handling, cleaning, drying and blending, along with freight incentives.
During his introductory remarks, and in a later question and answer session, Schmidt talked at length about the company’s plans for mergers and acquisitions.
While not identifying any specific targets, he made it clear the company is actively pursuing potential additions to its operation, mainly in the United States, Australia and Europe, and possibly India and China.
“We are being aggressive, but also highly selective and disciplined,” said Schmidt. “We are going to find transactions, more than one, over time that add shareholder value with the discipline that we have used.”
Schmidt said the company has looked closely at a number of potential purchases but decided they weren’t worth the prices being asked.
“We’re confident in our position and we’ll continue to look at opportunities and in fact there are opportunities we’re reflecting on at this time.”
Some other highlights from the quarterly report include:
- Cash flow from operations was $261.4 million, up from $126.1 million.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $272.6 million.
- Grain shipments totalled 3.7 million tonnes, reflecting strong global demand for grain and oilseeds.
- For the year to date, Viterra has gained synergies worth $87 million from the merger of SWP and AU. The company expects synergies will top out at $104 million midway through 2008-09.
Market analyst David Newman of National Bank Financial said Viterra’s quarterly results exceeded estimates, and boosted his year-end projections for 2007-08.
He is now projecting revenue of $6.4 billion, up from the previous estimate of $5.8 billion, EBITDA of $498 million, up from $455 million, and earnings per share, fully diluted, of $1.11, up from 93 cents.
Newman’s target price for Viterra shares traded on the Toronto Stock Exchange remains at $16, calculated as nine times projected 2008-09 EBITDA, although he added that could go higher.
“We have not accounted for potential acquisitions, which are increasingly likely and closer at hand,” he said. “This could add $3 to our target price.”
Viterra shares closed at $10.40 the day the quarterly results were released, up 19 cents. The share price has been on a steady downward trend since mid-June, when it was slightly less than $15.
