September 11, 2009 / 3:22 PM / in 8 years

UPDATE 3-Viterra profit slides, stock gains on ABB deal

* Q3 EPS C$0.51 vs analysts’ estimate of C$0.57

* Profit C$120.7 mln vs year-earlier C$166.7 mln

* Processors in southeast Asia, Australia next targets

* Shares end up 2.6 pct at C$9.86 (Recasts with stock rise, adds CEO comments)

By Rod Nickel

WINNIPEG, Manitoba, Sept 11 (Reuters) - Viterra Inc VT.TO, Canada’s largest grain handler, reported a nearly 28 percent drop in quarterly earnings on Friday, but its shares finished higher as investors gave its growth strategy a vote of confidence.

Viterra said it earned C$120.7 million ($112 million), or 51 Canadian cents a share, in its third quarter, ended July 31, down from a profit of C$166.7 million, or 71 Canadian cents a share, in the year-earlier quarter.

Analysts, on average, had expected earnings of 57 cents a share, according to Reuters Estimates.

Despite missing forecasts, Viterra shares ended the session up 2.6 percent at C$9.86 on the Toronto Stock Exchange.

Investors buying the stock were likely applauding Viterra’s takeover of Australia’s ABB Grain ABB.AX earlier in the week, said analyst David Newman of National Bank Financial.

“The aura of ABB is obviously helping,” he said. “(And) clearly (Viterra) has got great traction in Canada.”

Acquiring ABB gives Viterra grain sources in both the Northern and Southern Hemispheres, access to the Southeast Asian market and makes the company one of the world’s top grain handlers.

FERTILIZER DEMAND DOWN

Weak demand for fertilizer, even at lower prices than a year earlier, and for agricultural chemicals due to a cool, dry spring, drove down revenue in Viterra’s agriproducts segment by 7 percent to C$938.7 million in the quarter.

“Obviously, farmers held off on the fertilizer side, but that should be picking up again next spring,” Newman said. “They have to (come back) sooner or later.”

Overall revenue was C$2.2 billion, in line with last year’s quarter, helped by a 12 percent increase in grain-handling and marketing revenues to a total of C$1.1 billion.

“Weather challenges and fertilizer prices were the primary factors in the quarter performance,” Chief Executive Mayo Schmidt said in a conference call.

“While we, an operating company, fared significantly better than those companies that are pure fertilizer companies, we were not immune to the global supply and demand fundamentals.”

Viterra shipped 26.3 percent more grain than it did a year earlier, reflecting last fall’s bumper harvest.

The third quarter is usually the period during which Viterra makes most of its fertilizer and grain-handling sales, typically making it a strong quarter.

The company’s next acquisition targets will be processors in Australia or Southeast Asia that can help it capitalize on its new diversified grain supply, Schmidt said later on Friday in an interview with Reuters.

“(The acquisition) has broadened out our origination and we look to build out the processing side of that now,” he said.

Australia, which has a similar culture and legal system to Viterra’s home base of Canada, is a convenient entry point to Southeast Asia, he said.

“We have entered at exactly the right time ... It is a tremendous gateway to Asia and we intend to make an impact,” Schmidt said.

Viterra has become one of the world’s biggest grain players with the ABB acquisition, but Schmidt said that won’t necessarily trigger a flurry of takeovers by its international rivals, who include Archer Daniels Midland (ADM.N) and Cargill [CARG.UL]. The big multinationals already have multiple source points of origin for grain, he said.

$1=$1.08 Canadian Reporting by Rod Nickel; editing by Rob Wilson

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