Timing is everything, whether you’re telling jokes, swinging a golf club or, it seems, merging two grain companies.
Viterra has reported net earnings for the 15 months ending Oct. 31, 2007, of $106.1 million.
For the 12 months ending Oct. 31, the earnings figure was $111.2 million, or 80 cents per share, compared with $3.1 million, or three cents per share, for the 12 months ending Oct. 31, 2006, as reported by the Viterra’s predecessor Saskatchewan Wheat Pool.
The huge increase in profits reflects the impact of the Pool’s May 2007 takeover of Agricore United, Canada’s largest grain company, as well as a booming grain economy.
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“Our timing could not have been better,” said Mayo Schmidt, Viterra’s chief executive officer.
Throughout 2007, world grain stocks tightened, demand increased and commodity prices rose to unprecedented levels, he said.
“As a result we’re seeing strong producer cash flow and good demand for crop inputs that we sell and the commodities that we marketed throughout the world,” he said.
That created a perfect environment for Viterra to get off on the right financial foot.
“Strong commodity markets bode well for the Canadian agricultural industry,” he said.
He said Viterra’s appetite for expansion hasn’t been sated.
While the bulk of the company’s energies and attention was focused on the AU deal last year, it now can take a serious look at other opportunities for mergers or acquisitions.
“We are analyzing many different opportunities for the company in each of our operating divisions,” he told reporters and market analysts during a Jan. 18 conference call.
That includes possible moves in Canada, the United States and overseas, although he declined to be more specific.
Schmidt said the grain industry’s optimistic outlook is reflected in Viterra’s results.
(Sask Pool’s fiscal year traditionally ended July 31. Viterra’s year ends Oct. 31. As a result, year to year comparisons are based on the 12 month period ending Oct. 31 for 2006 and 2007.)
The company reported sales and revenues totalling $3.5 billion, up from $1.6 billion a year earlier.
The big drivers were increased grain handling volumes and strong fertilizer sales, but all operating divisions contributed.
- Grain handling and marketing – Shipments of 12.5 million tonnes were up by 4.3 million tonnes, mainly as a result of additional shipments through AU facilities. Grain margins averaged $24.79 per tonne, up from $20.05, and market share was around 44 percent.
- Agriproducts – Increased sales and margins for crop inputs like seed, pesticides and fertilizer boosted earnings to $124 million, from $28.9 million. Fertilizer led the way, thanks to higher prices and lower manufacturing costs.
- Agrifood processing – Much of the earnings increase came from profits at Can-Oat Milling associated with the purchase of a plant at Barrhead, Alta., but that was offset partly by weaker margins due to a poor quality oat crop, increased overhead costs and foreign exchange losses due to the rising loonie.
- Two new operating divisions – Livestock Feed Services and Financial Products, generated combined earnings of $9.4 million between May 29 and Oct. 31, 2007.
The cost of integrating the two companies totalled $20 million during the 2007 fiscal year. That included severance payments, consulting fees and advisory costs.
The company realized a gain on disposal assets of $35.2 million, including $30.4 million from the sale of a Vancouver terminal to Cargill Ltd., a deal related to the AU acquisition.
