September 9, 2010

 

Viterra posts decrease in quarterly profit

 

 

The quarterly profit for Viterra Inc fell 47% as wet spring growing conditions sharply cut Western Canada's crop acreage.

 

Reduced Canadian plantings hurt sales of fertiliser and chemicals, cutting agri-products revenue by 13% and reducing North American grain shipments.

 

Analysts were braced for the impact of smaller plantings after Viterra issued a warning in early July, and the company's earnings per share excluding one-time items were only slightly below analyst expectations.

 

"Going forward, it still looks pretty strong," said Jason Zandberg, analyst at PI Financial Corp. "The quarter didn't blow the doors off but I don't know that there's anything to be too concerned about here."

 

Viterra, which also owns South Australia's main grain storage and handling facilities, reported net income including one-time costs of CAD63.5 million (US$60.6 million), or 17 Canadian cents a share, for its third quarter ended July 31. That is down from CAD120.7 million (US$115.1 million), or 51 Canadian cents a share, a year earlier.

 

Net income included one-time costs of CAD17.7 million (US$16.9 million) for after-tax refinancing and CAD9.1 million (US$8.7 million) for additional after-tax amortisation - the latter associated with the purchase of Australian assets.

 

The weaker results were in line with the company's warning on July 8 that smaller Canadian plantings would weigh on third-quarter performance, said Chief Executive Mayo Schmidt.

 

Schmidt said he expects Western Canadian production of 44-45 million tonnes, which would be well below the 10-year average of 49-50 million tonnes.

 

Achieving even that size of harvest, however, depends on frost-free days in September - when frost typically arrives - and good harvest conditions in October, he said.

 

Severe drought in the Black Sea, which has driven up wheat prices by about two-thirds since early June, bodes well for Viterra in 2011, given its expansion into other major crop producing countries such as Australia, Schmidt said.

 

Higher prices have spurred Australian farmers into selling their crops, something that will likely continue for the next several quarters, he said.

 

Revenue at the Regina, Saskatchewan-based company rose 14% to CAD2.5 billion (US$2.4 billion), slightly below expectations of CAD2.6 billion (US$2.5 billion).