September 12, 2008


Viterra continues to seek merger, acquisition opportunities



Viterra Inc. officials said the Canadian agriculture giant continues to actively look for merger and acquisition opportunities, but emphasized the company's desire to exercise caution given the volatility in commodity markets and the recent downward commodity price correction.


On September 10, Viterra Inc. held a news conference to announce the company's third quarter financial results, which ended July 31. Mayo Schmidt, president and chief executive officer summarized the quarterly results before opening the floor to questions from the media.


According to company executives, a number of whom who were also on hand during the media conference to answer questions, Viterra's disciplined merger and acquisition approach led to the company passing on a number of opportunities that, given the commodity price correction that has taken place, ultimately proved to be the right decision.


A number of projects were considered but passed up because Viterra was not willing to pay for the values that were being sought, according to an official.


Viterra continues to actively seek new opportunities, however, and according to one company spokesperson, the company hopes to be able to make a merger and acquisition announcement before the end of the current calendar year.


As for the type of opportunities sought by Viterra, officials cited Prairie Malt and CanOat Milling as the type of companies Viterra would be interested in buying.


Schmidt also spoke during the conference about the company's profitable fertilizer business. Viterra's fertilizer sales increased by C$294 million in the third quarter, bringing the total of sales to date to C$784 million, he said.


Fertilizer prices strengthened on tight world supply, significant reductions on exports from China, heightened demand from India, Brazil, the US and Canada, higher commodity prices and greater demand from producers, who purchased greater volumes to maximize the yield potential of their crops, Schmidt explained.


Looking ahead, Schmidt said producers have signalled their optimism for the 2008/09 crop year by pre-paying for an increased amount of agricultural products, including fertilizer.


As of July 31, farmers had pre-paid for C$89 million worth of agriculture products, compared with the C$3 million worth of product pre-paid last year at the same time.


"This is an example of producer commitment to fall agriculture product purchases," Schmidt said.


Company officials were also asked during the media conference to offer their opinion on 2008/09 total Canadian grain and oilseed production.


A spokesperson said Viterra is anticipating higher production this year than last but said three weeks of good weather is probably needed in order to get crops off the fields and into the bins.


At this point in the season, frost would likely have only minimal impact on crop quantity and maybe only a slightly higher impact on quality. The biggest threat right now is rain, which could delay harvest operations, the spokesperson said.


Finally, Schmidt also spoke briefly about the ongoing labour dispute between Viterra and the Grain Services Union, or GSU.


While workers have been picketing outside the company's office in Regina, to date the strike has had a minimal impact on operations thanks to the contingency plans Viterra has in place, Schmidt said.


"We have been told the union intends to disrupt operations at the Saskatchewan country facilities during the harvest. But again, to date their action has had no material impact. We are confident in our contingency plans and our ability to operate effectively through this busy season," he said.


When asked by a member of the media to comment on rumours GSU plans to disrupt Viterra's port activity, company officials reiterated their confidence in Viterra's contingency plan and the minimal impact the labour dispute has had on operations to date.

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