Buying Canada’s largest grain handler appears to have been a financially healthy move so far for Saskatchewan Wheat Pool.
The company, operating under the name Viterra since its marriage to Agricore United last summer, on Wednesday posted net earnings of $41.2 million on $1.32 billion in sales for the quarter ending Jan. 31.
Officially, that’s up from a net of $7.94 million on $447.6 million in sales in the year-earlier period in 2007, although Viterra’s 2007 numbers don’t include Agricore United’s pre-merger earnings for a full comparison.
The grain company sees “positive signals” continuing in the near term, such as strong fundamental demand for ag commodities, especially in areas of the world with rising populations and growing economies.
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Furthermore, Viterra CEO Mayo Schmidt said in a release Wednesday, “supply limitations for most soft commodities in key producing regions have resulted in global ending stocks reaching near all-time lows in 2007. Preliminary indications suggest farmers intend to maximize their plantings this year and increase production.”
The Agricore United deal boosted SaskPool’s total grain handling capacity by about 66 per cent to 1.9 million tonnes. Its Q1 grain handle, as a result, rose about 91 per cent to 4.2 million tonnes, based on a higher turnover ratio due to “greater efficiencies” in the firm’s grain handling pipeline.
The company posted a ratio of Canadian Wheat Board grain shipments to shipments of non-board crops, running at about 42:58 compared to 56:44 for the year-earlier period and 51:49 for the industry overall, due mostly to a number of feed barley shipments handled during the temporary deregulation of the CWB’s barley program last fall.
The AU deal also boosted SaskPool’s number of retail facilities from 100 to 276 and also made Viterra the sole owner of fertilizer maker and wholesaler Westco. Thus, Viterra’s agri-products division doubled its Q1 sales to about $166 million.
“Higher farm incomes in 2007, and continuing high commodity prices in 2008 are positive indicators for the agri-product segment, as farmers have additional flexibility to fund their input purchases,” the company wrote.
However, it added, “these factors have also created some hesitation among growers about which crops to grow.” Viterra expects seed sales to recover in its second and third quarters.
On the other hand, the former AU’s livestock feed and services decision may take a hit as the year goes on, due to “higher feed ingredient costs (which) are also driving higher feed prices, which may further exacerbate the strain on hog producers.”
Hog market conditions also have Viterra “monitoring its investment” in hog production and animal feed company Puratone Corp., based at Niverville, Man. That equity investment posted a $1.5 million loss in Viterra’s Q1, it noted.
