Trading halted briefly | Grain company acknowledges takeover interest from unnamed source
Viterra Inc. reported last week that its first quarter net earnings were down $23 million compared to the same period last year, mainly because of lower grain handling and processing earnings.
Earnings per share dropped from 27 cents to 21 cents.
The results were announced a day before trading halted briefly after the company acknowledged it had received an expression of interest from unnamed third parties.
The company’s net earnings of $77.7 million were down from $100.7 million at the same time last year.
Chief executive officer Mayo Schmidt said the financial results are solid and impressive in challenging economic times.
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“Our vertically integrated business model and irreplaceable assets in strategic locations proved resilient,” he said.
The company’s earnings before interest, taxes and depreciation (EBITDA) declined by $21 million year over year.
EBITDA dropped by $17 million in grain handling and marketing and $14 million in processing while increasing by $4.8 million in agri-products.
The agri-products segment appears poised for a solid fiscal year based on three factors:
- Schmidt said Viterra expects the six to eight million acres that were left unseeded in Canada last year to return to production.
- The company forecasts 18.5 to 19.5 million acres of canola, a high input crop.
- Doug Wonnacott, chief operating officer for the agri-products group, said input rates are likely to increase. Farmers will be motivated to maximize profit, Schmidt added.
Wonnacott said fertilizer margins rose in the first quarter from $99 per tonne to $130 per tonne.
“Last fall we had an early harvest, we had great weather and, as such, it gave the farmers an opportunity to put down a lot of ammonia in November,” he said.
“A lot of that is our own manufactured ammonia so that drove the fertilizer margins up significantly.”
Low natural gas costs, which are below $2 per gigajoule, will also enhance the margin.
Viterra is projecting seeded acreage in Western Canada of 57 to 59 million acres.
It expects the end of the CWB monopoly to eventually add $40 to $50 million to its annual EBITDA.
In Australia, Viterra will soon open its new Minto malt plant and decommission two older plants. This move will see the closure of 55,000 tonnes of capacity but the opening of 110,000 tonnes, pushing the company’s total capacity to 600,000 tonnes per year.
Schmidt said there is significant grain in storage in Australia, including 6.6 million tonnes of new crop received during the first quarter and 1.8 million tonnes of carryover.
In Western Canada, Viterra expects to handle 31 to 33 million tonnes of the six major grains through the full fiscal year, and maintain or improve its 45 percent market share.
Fran Malecha, chief operating officer of grains, said volume and movement have been strong. He questioned the actual size of last year’s North American crop.
“It appears that there might be more grain around in the system than probably what the reports are showing, but that remains to be seen,” he said.
“If we keep this pace up … then we get pretty close to running out of grain, so something has to give. Either there has to be a slow down in shipments or there’s more grain out there than we originally thought, or than the market thinks.”
