March 12, 2008 / 3:13 PM / 10 years ago

UPDATE 3-Viterra posts profit on strong sales; stock soars

(Adds CEO comments, closing share price)

By Roberta Rampton

WINNIPEG, Manitoba, March 12 (Reuters) - Higher grain handling margins and brisk fertilizer sales helped Viterra VT.TO mark a quarterly profit of C$41.2 million ($41.6 million), or 20 Canadian cents a share, Canada’s top grain company said on Wednesday.

The news sent Viterra’s shares to a five-year high of C$14.10 on the Toronto Stock Exchange, up as much as 13 percent or C$1.70, before closing at C$13.61, up C$1.21 or nearly 10 percent.

“Our next step must be to grow,” Chief Executive Mayo Schmidt told the company’s annual meeting on Wednesday.

“To be a viable competitor in this sector, we cannot be content to be the strongest player in Canada,” Schmidt said.

Viterra, which changed its name from Saskatchewan Wheat Pool after its C$1.8 billion takeover of Agricore United last year, did not provide pro forma results for the year-earlier quarter for comparison.

Analysts surveyed by Reuters Estimates had expected, on average, a break-even quarter, with estimates ranging from a profit of 20 Canadian cents per share to a 30 cent loss.

The Regina, Saskatchewan-based company had sales of C$1.3 billion in the quarter ended Jan. 31.

Viterra handled almost twice as much grain during the quarter as it did before the takeover, and handling margins were up more than 15 percent to C$27.86 from Saskpool’s margins a year earlier, Schmidt said.

The company increased its forecast for margins to C$24-C$26 per tonne for the year from a previous C$22-C$23.

Soaring, volatile grain markets have increased Viterra’s ability to arbitrage cash and futures markets, and helped it take advantage of other merchandising opportunities, senior officials told analysts on a conference call.

“I don’t think we’ll see the tremendous upswings like we’ve seen in the last probably 60 days, but we do see higher prices,” said Fran Malecha, chief operating officer.

Viterra, a major processed-oats supplier to U.S. cereal companies, wants to expand its processing operations in Canada and elsewhere, Schmidt said, citing the United States, Europe, Australia and the Pacific Rim as areas of interest.

It also wants to expand its livestock feed business, targeting the southern United States dairy industry, he said.

But Schmidt said the company would monitor its stake in Puratone, a hog production company, because of losses caused by the strong Canadian dollar, poor prices and high feed costs.

“Right now, everyone involved is feeling the pain,” Schmidt said.

He said the company wants to help consolidate Canada’s crop supply retail sector, noting 250 players own 900 retail operations for inputs such as fertilizer and chemicals in Western Canada, including Viterra’s 275 locations.

“It’s an area that can’t sustain itself,” Schmidt said.

Fertilizer sales have been strong this winter as rising prices pushed some farmers to pre-book supplies before spring, said Doug Wonnacott, senior vice-president of agri-products.

But he said he expects annual fertilizer volumes to remain flat, with some farmers applying less of the expensive input.

“We do have a concern that those who have not covered a significant portion of their business will likely be suffering from sticker shock,” Wonnacott said.

$1=$0.99 Canadian Reporting by Roberta Rampton; editing by Rob Wilson

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