January 21, 2010 / 10:29 AM / 8 years ago

RPT-UPDATE 3-Viterra posts small loss on soft commodity prices

* EPS nil versus analyst forecast C$0.07

* Revenue down 17 pct at C$1.42 billion

* New Australia operations add C$6.2 mln loss

* Trade restrictions hurt quarter - CEO

* Viterra shares down 5.2 pct on TSX (Adds analyst comments, updates share price)

By Rod Nickel

WINNIPEG, Manitoba, Jan 21 (Reuters) - Viterra Inc VT.TO VTA.AX posted a small fourth-quarter loss on Thursday as the top Canadian grain handler grappled with weak fertilizer margins and declining commodity prices, dashing expectations of a modest profit.

For the three months ended Oct. 31, Viterra posted a loss of C$920,000 ($877,000), or nil per share, compared with net income of C$46.8 million, or 20 Canadian cents a share, a year earlier.

The company said sales and other operating revenue fell 17 percent to C$1.42 billion, due to significant decline in commodity prices.

Analysts, on average, had expected Viterra to report earnings per share of 7 Canadian cents on revenue of C$1.64 billion, according to Thomson Reuters I/B/E/S.

Viterra’s shares on the Toronto Stock Exchange were 5.2 percent lower at C$10.03 on Thursday afternoon.

The drop was due to the softer than expected earnings as well as overall weakness on the TSX, said Robert Winslow, an analyst for Wellington West Capital Markets.

“That’s the headline — the numbers are soft,” Winslow said in an interview. “But if you dig into the numbers on the grain-handling side, gross margin per tonne is well ahead of the Street’s expectations and that’s the bright light in an otherwise challenging quarter.”

Viterra is forecasting a margin of C$30 to C$33 per tonne of grain in 2010, compared with C$25.38 in 2009.

The company was expected to post weaker results than a year earlier because grain prices have pulled back from record highs and farmers have been holding off on applying fertilizer.

The outlook is brighter for 2010, Chief Executive Mayo Schmidt said. South Australian and Canadian farmers harvested big crops and should resume normal buying of fertilizer, he said.

The earnings include five weeks of results from ABB Grain, the Australian grain handler that Viterra bought in September. Australian operations also weighed on the quarterly results, posting a net loss of C$6.2 million, which the company said reflected the seasonally slow pre-harvest period.

Viterra said on Thursday that it intended to reduce the short-term debt of its Australian operations by C$300 million by the end of this month to lower its interest expenses.

Despite paying down its Australian debt, Viterra still has C$800 million available for further acquisitions.

The ABB purchase placed the Regina, Saskatchewan-based Viterra among the world’s top grain handlers with grain sources in both the Northern and Southern Hemispheres.

Restrictions by China and the United States on Canadian canola imports and European concerns about flax shipments also affected the fourth-quarter performance, Schmidt said.

“It certainly has impacted the performance when you consider that Viterra had an experience of as high as 60, or north of 60, percent of the canola sales into China,” he said.

China has restricted imports of Canadian canola with blackleg disease and the United States has imposed shipping restrictions against several Canadian crushers, including a Viterra plant in Manitoba, after finding salmonella bacteria in their canola meal.

Shipping of flax to Canada’s top flax export market, the European Union, almost halted last fall after the discovery of genetically modified materials in shipments.

“The main catalyst to overcoming (restrictions) is, regardless of whether it’s a food or a feed operation, we run it like it is a food operation,” Schmidt said.

$1=$1.05 Canadian Additional reporting by Bhaswati Mukhopadhyay in Bangalore; editing by Rob Wilson

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