Viterra fertilizer sales up, takes 4Q inventory write-down; another expected in 1Q

Viterra reported a C$100 million increase in fourth-quarter fertilizer sales, to $228.1 million versus the year-ago $126.8 million. Viterra said the sales for the quarter ending Oct. 31, 2008, were up largely due to higher prices on lower volumes. The company also noted its expanded network due to the merger of its predecessors, Saskatchewan Wheat Pool and Agricore United. Prices began declining toward the end of the quarter, prompting farmers to delay purchases. Additionally, excessive moisture levels in parts of Western Canada and a later harvest also led to reduced applications of anhydrous ammonia.

Viterra took a $24 million inventory write-down during the quarter to reflect the net realizable value of the fertilizer inventory as of Oct. 31, 2008. Based on current pricing, Viterra expects to take another inventory write-down of $30-$40 million in the first quarter ending Jan. 31, 2009.

As for the outlook for the growing season, Viterra said nitrogen prices may have reached bottom and have shown some rebound due to global production cutbacks of 10-15 percent. However, the company said phosphate pricing has further softened since Oct. 31. Viterra believes manufacturing cutbacks will lead to tighter supplies during the upcoming growing season. As a result, it expects demand will be strong and believes its retail distribution system is well positioned to deal with demand pressures. It reports that seed bookings for the spring have been progressing as expected and that sales of equipment, in particular corrugated storage bins, have remained strong due to increased producer cash flow in 2008.

Viterra reiterated that over 21,500 of its customers have already been pre-approved and conditionally approved for $1 billon in credit for the growing season. It expects some $1.4 billion will be extended to its customers during the season.

Fertilizer sales for the year ending Oct. 31, 2008, were $1.01 billion compared to the prior year $475.7 million. Sales for the prior year exclude seven months (Nov. 1, 2006-May 31, 2007) of pre-acquisition sales attributable to AU and the additional 57 percent ownership of Westco.

Overall, Viterra’s Agri-Product sector, which includes fertilizer and other inputs, recorded a gross profit of $89.8 million (EBITDA $44 million) on sales of $308.1 million for the fourth quarter, versus the year-ago $42 million (EBITDA $9.2 million) and $172.8 million, respectively. Full-year gross profits from the unit were $437.6 million (EBITDA $276.9 million) on sales of $1.7 billion, versus the prior year’s $219.2 million (EBITDA $124 million) and $934.6 million, respectively.

Company-wide, Viterra reported fourth-quarter net earnings of $46.8 million ($.20 per share and EBITDA of $100.2 million) on sales of $1.7 billion, versus the year-ago $842,000 ($.00 per share and EBITDA of $62.3 million) and $1.3 billion, respectively. Full-year net earnings were $288.3 million ($1.31 per share and EDIBTA of $532.6 million) on sales of $6.8 billion, compared to the prior year’s $166.5 million ($.84 per share and EBITDA of $265.8 million) and $3.5 billion.