Lower seeded acreage and wet weather contributed to a 47 percent drop in year-over-year quarterly earnings, Canada’s largest grain handler said last week.
Viterra Inc. reported net income of $63.5 million for its third quarter ending July 31, compared to $120.7 million in the same quarter last year.
Year-to-date earnings were $93 million, compared to $114 million at the same point in fiscal 2009.
Chief executive officer Mayo Schmidt said agri-product sales dropped 22 percent, or $210 million, in the quarter.
“This is a direct result of the excessive rains in May and June that impacted seeded acreage,” he told a conference call.
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Good harvest and post-harvest weather could improve Viterra’s financial position, he said, because farmers will be able to apply ammonia and weed control products.
Doug Wonnacott, senior vice-president of agri-products, said the company is expecting a normal ammonia application season.
He also expects fertilizer to move well.
“We have a fair bit of dry fertilizer that moves from our warehouses and our retail outlets to on farm storage,” he said. “With the expectation of rising prices, we’ve seen a fair bit of activity there and as a result of that, again, our expectation on the movement of dry fertilizer to farm should be fairly good.”
In July, Viterra estimated that the loss in fertilizer and chemical sales due to unseeded acres and wet weather would be 15 to 17 percent.
Wonnacott said that turned out to be optimistic. However, the seeded acreage decline prompted some competitive retail activity.
“We saw a significant amount of value come out of glyphosate as well as other herbicides,” he said. “One of the things that helped us significantly was the introduction of our generic products.”
The entrance of new players in the burn down product category also helped Viterra preserve some of its chemical margin, he added.
Viterra’s consolidated sales were actually up $273 million to $2.5 billion in the third quarter. Year-to-date revenue is $6.3 billion.
Those results are thanks to Viterra Australia, which contributed $558.5 million in the quarter and $1.9 billion for the year.
The company’s earnings before taxes, depreciation and amortization were $197 million for the quarter and $380 million to date, up by $96 million for the year. They reflect Viterra
Australia’s contribution and revenue from Dakota Growers Pasta Co., which Viterra bought earlier in the year.
Viterra shipped 6.1 million tonnes of grains and oilseeds during the quarter, including 4.4 million tonnes out of North America.
Schmidt said if the weather cooperates, western Canadian production of the six major grains could reach 44 to 45 million tonnes, below the 10-year average of 49 to 50 million tonnes.
In South Australia, the government estimates a crop of 7.3 million tonnes, or about 30 percent greater than the five-year average.
Asked about the potential entry of Agrium into the Australian industry, Schmidt said there would be no significant overlap with Viterra interests. Agrium has made a bid for Australia’s AWB Ltd.
“Potentially four facilities that AWB has would be in the regions that we’re involved in, of the more than 20 that they have,” Schmidt said.
He added that Viterra is focusing on share price and earnings but is keeping an eye on potential acquisitions and opportunities.
“We do have a growth strategy but it’s a very disciplined one,” he said.
Viterra is building a canola crush plant in China and Schmidt said the Black Sea region is also of interest.
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Sales &operating revenues
Gross profit &net revenuesOperating &admin. expensesEBITDA **Net earnings$2,222.43347.95-143.48204.47120.69$2,495.45392.67-196.05196.61
63.54
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EBITDA, by geography, for three months ending July 31, 2010:(in $millions) North America Australia
Grain handling &marketingAgri-productsProcessingCorporate expensesTotal EBITDA57.996106.65920.062-25.836158.88142.857-0.9091.881-6.09637.733consolidated100.853105.75021.943-31.932
196.614
