Early seeding boosts Viterra 2Q fert volumes; wet weather may decrease 3Q Sask. acreage

Viterra Inc. reported a 36 percent increase in North American sales volumes for the second quarter ending April 30, 2010. Consolidated volumes were up 50 percent to 371,000 mt for the quarter, versus the year-ago 247,000 mt, reflecting the addition of 35,000 mt from the acquisition of ABB Grain Ltd., as well as good demand in North America. Volume increases were offset by decreases in fertilizer prices relative to last year.

Second-quarter fertilizer sales were C$163.9 million, versus the year-ago $144.8 million. North American sales during the second quarter were $145.2 million, on par with year-ago levels.

Viterra said warm weather across the Prairies, particularly Manitoba, allowed farmers to begin seeding early, resulting in some of Viterra’s third-quarter sales moving into the second quarter.

Viterra said moisture conditions in the Prairies are extremely good, although they have been excessive in some regions. Significant rainfall in late May has stalled seeding in some regions, particularly northeast Saskatchewan. As a result, Viterra believes there is a potential for a decline in seeded acreage in that locale. As of the week of June 7, Viterra estimates that 95 percent of the Alberta crop has been sown, 70 percent of Saskatchewan, and 90 percent of Manitoba.

Despite the wet weather, Viterra expects third-quarter fertilizer margins to reflect stronger volumes relative to last year, offset by weaker margins per mt compared to last year.

Six-month fertilizer volumes were 681,000 mt with sales of $284.5 million, versus the year-ago 516,000 mt and sales of $314.5 million, respectively. While North American volumes were up 24 percent, the company saw lower retail margins due to competitive pressures in Western Canada.

In addition to fertilizer, all segments within Viterra’s Agri-Products segment saw sales increases in the second quarter. Agri-Products reported gross profit of $77 million on sales of $440.3 million, versus the year-ago $55.7 million on sales of $270.3 million, respectively. EBITDA was up, at $30 million versus $18.2 million. Six-month gross profit was $109.6 million on sales of $655.5 million, versus the year-ago $50.8 million on sales of $460.2 million. Six-month EBITDA was up as well, at $18 million from the year-ago loss of $22.9 million.

“From an Agri-Products perspective, we expect demand to remain strong next year as producers look to increase yields,” said Mayo Schmidt, Viterra president and CEO. “Profitability in this segment will depend somewhat on commodity pricing levels, particularly for fertilizer, which we believe, consistent with industry views, will strengthen with the growth for food and food ingredients around the world.”

Company-wide, Viterra second-quarter net earnings were $18.4 million on sales of $2.05 billion, versus the year-ago $26.3 million on sales of $1.61 billion. EBITDA was $93.2 million, up from $85.4 million. Six-month net earnings were $29.1 million on sales of $3.83 billion, versus a year-ago loss of $6.6 million on sales of $3.0 billion. EBITDA was $183 million, up from $79 million. New Australian assets brought in $23.1 million in net earnings during the first six months. The year-ago period included a $25.4 million aftertax negative item, $19.4 million of which was a fertilizer inventory write-down.