Viterra Inc. ("Viterra") (TSX:VT) (ASX:VTA) made great progress in fiscal 2010
furthering its vision of being a leading global food ingredients business in the
world's agriculture supply chain. The Company placed the finishing touches on
its foundation for growth, extended its international intelligence network,
expanded its processing capabilities and delivered solid financial results. For
the year ended October 31, 2010, Viterra generated EBITDA(3)of $518 million
compared to $324 million in fiscal 2009. The increase was driven by Viterra
Australia's operations which were acquired in September 2009 and contributed
$176 million in fiscal 2010. Strong fourth quarter fertilizer sales and
contributions from new pasta and oat processing businesses also increased
EBITDA.
Net earnings for the year were up 28% to $145 million compared to $113 million
in 2009. Earnings per share were $0.39 per share in fiscal 2010 compared to
$0.45 per share in fiscal 2009 as the weighted average number of shares
increased by 120 million shares year-over-year.
----------------------------------------------------------------------------
Actual
Twelve Months
(in thousands - except per share ended October 31, Better
items) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Sales and other operating
revenues $ 8,256,280 $ 6,631,666 $ 1,624,614
Gross profit and net revenues
from services 1,258,567 839,031 419,536
EBITDA (3) 517,583 323,698 193,885
Net earnings (loss) 145,272 113,127 32,145
Earnings per share $ 0.39 $ 0.45 $ (0.06)
Cash flow provided by (used in)
operations 361,249 223,423 137,826
Per share $ 0.97 $ 0.89 $ 0.08
Free Cash Flow (3) 239,421 138,661 100,760
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Actual
Three Months
(in thousands - except per share ended October 31, Better
items) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Sales and other operating
revenues $ 1,951,692 $ 1,417,139 $ 534,553
Gross profit and net revenues
from services 319,911 159,108 160,803
EBITDA (3) 137,958 40,236 97,722
Net earnings (loss) 52,671 (920) 53,591
Earnings per share $ 0.14 $ (0.00) $ 0.14
Cash flow provided by (used in)
operations 88,020 (15,165) 103,185
Per share $ 0.24 $ (0.05) $ 0.29
Free Cash Flow (3) 50,554 (45,981) 96,535
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
For the year ended October 31, 2010, Viterra's consolidated sales and other
operating revenues reached $8.3 billion, increasing $1.6 billion or 24% from
fiscal 2009. The increase was mainly attributable to Viterra Australia's
operations that contributed $2.3 billion to revenues in fiscal 2010 and to new
food processing contributions. Lower volumes and commodity prices in the
Company's North American grain handling operations partially offset this
increase.
The Company generated cash flow provided by operations in fiscal 2010 of $361
million or $0.97 per share up from $223 million or $0.89 per share in fiscal
2009. Free cash flow was $239 million compared to $139 million in fiscal 2009.
"Agriculture continues to be at the forefront of the global economy," commented
Mayo Schmidt, Viterra's President and Chief Executive Officer. "Recently,
flooding in parts of Australia, droughts in Argentina and potential crop
damaging frost in Europe has tightened supply and pushed commodity prices up,
allowing them to return from the soft pricing environment experienced during the
last two years. Viterra is ideally situated with a strong leadership position in
origination from both North America and South Australia. In fact, South
Australia is currently harvesting what is expected to be a record setting crop.
The Company also successfully integrated three major acquisitions during fiscal
2010 thanks to the efforts of our employees. Looking forward, Viterra is focused
on delivering more value to shareholders through these acquisitions, its
existing asset base, and other opportunities that present themselves in the
marketplace in fiscal 2011."
----------------------------------------------------------------------------
Key Financial Information (3)
(in thousands - except As at October 31,
percentages, pts and ratios) 2010 (1) 2009 (2) Change
----------------------------------------------------------------------------
Cash and cash equivalents $ 154,793 $ 1,033,075 $ (878,282)
Total debt 960,806 1,574,714 (613,908)
Total debt, net of cash and cash
equivalents 806,013 541,639 264,374
EBITDA (Twelve months ended
Oct 31,) 517,583 323,698 193,885
Ratios
Current ratio 2.02 x 2.23 x (0.21 x)
Debt-to-total capital 20.6% 31.0% (10.4 pt)
Long-term debt-to-capital 19.3% 25.3% (6.0 pt)
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures section at the end of this release
Viterra's total debt-to-capital ratio at October 31, 2010 remained strong at
21%. At year end, Viterra had $155 million in cash and cash equivalents and cash
drawings of $52 million on its $1.6 billion Global Credit Facility.
The Company generated strong fourth quarter results with EBITDA of $138 million
and net earnings of $53 million. This is a significant increase over the prior
year when EBITDA and net earnings were $40 million and a loss of $1 million,
respectively. A full quarter of operations from Viterra Australia, strong
fertilizer sales and new contributions from the pasta and oat processing
businesses drove these increases.
"We are very pleased with our acquisitions of Dakota Growers and 21st Century,"
stated Mr. Schmidt. "These new pasta and oat processing businesses are highly
accretive and provide Viterra with stable predictable earnings, which we expect
to generate higher returns for shareholders."
A summary of the Company's quarterly results begins on Page 4 of this release.
Viterra's Annual Consolidated Financial Statements, Notes and Management's
Discussion and Analysis ("MD&A") for the year ended October 31, 2010 are
available on the Company's website (www.viterra.com) later today. A conference
call is scheduled for 2:00 p.m. EST. Details are available on Viterra's website,
under News Releases.
Harvest Update
The western Canadian harvest was essentially complete by the end of November
2010. Production for the six major grains is estimated to be 45.0 million metric
tonnes, about 8% below the 10-year average. Crop quality suffered somewhat on
later harvested crops due to excessive moisture and some frost damage during the
harvest period.
In South Australia, harvest is estimated to be approximately 80% complete.
Excellent growing conditions have resulted in a potentially record year with
production expected to be in the 9.0 to 10.0 million tonne range compared to a
five-year regional average of 5.2 million tonnes.
Outlook
Grain Handling and Marketing
Management anticipates Canadian Grain Commission ("CGC") receipts for the six
major grains in Western Canada to be in the 30.0 million tonne range for fiscal
2011, slightly lower than the approximately 32.0 million tonnes that is
typically available. Management's 2011 estimate includes some drawdown of
on-farm carry-over stocks as strong demand and corresponding prices entice
producers to market their grains.
The Canadian Wheat Board ("CWB") has set its preliminary export target for wheat
and barley out of Canada at 17.4 million tonnes for the upcoming crop year,
which is approximately 1 million tonnes lower than the past year. Demand for
open market grains is expected to remain strong, particularly out of the
Asia-Pacific region. As well, Viterra intends to expand its handle of both bulk
and containerized pulse crops throughout fiscal 2011.
For Viterra's South Australia grain handling operations, the Company expects
shipments to continue with momentum in fiscal 2011, given production issues in
other grain growing regions of the world and improved commodity pricing. As
well, Viterra's management currently estimates receivals for this business,
which primarily occur in the first quarter of the fiscal year, to be about 8.5
to 9.0 million tonnes. This is a significant increase over the prior year,
assuming that farmers are able to continue to successfully harvest the predicted
record crop.
The timing of shipments out of Viterra's Australian system is dependent on world
commodity markets and farmers' willingness to sell. Based on anticipated supply
and demand fundamentals for fiscal 2011, the large crop that is expected, and
the favourable commodity pricing environment, it is management's current view
that shipments out of Australia will be very strong throughout the first eight
months of the fiscal year.
Management currently estimates that its global pipeline margin per tonne for
fiscal 2011 will be in the range of $33 to $36 per tonne, up from its fiscal
2010 guidance of $30 to $33 per tonne. The increase reflects a full year of
gross profit contributions expected from its International Grain group, which is
now fully established.
Agri-products
For fertilizer, 2011 demand and pricing are expected to be strong due to
relatively high commodity prices and increased nutrient requirements as a result
of excess moisture in 2010. As well, to complement the positive pricing
fundamentals, western Canadian natural gas costs are expected to remain
relatively low throughout fiscal 2011, which positively impact the Company's
fertilizer manufacturing margins. For fiscal 2011, management currently
estimates that its combined fertilizer margin per tonne will be in the range of
$100 to $120 per tonne. This management estimate assumes strong spring
fertilizer sales, typical fall sales volumes, natural gas prices of
approximately $4.00 per gigajoule ("GJ"), modest price erosion from mid-June to
fall and continued strong commodity prices.
Seed bookings and customer prepayments for crop inputs for the spring season
have been progressing well, with $313 million as of December 31, 2010. The sales
of equipment, in particular corrugated storage bins, are expected to remain
strong into 2011 due to increased producer cash flow in recent years.
Management currently estimates that these strong fundamentals will, however, be
somewhat tempered by an expected 5% reduction in western Canadian seeded acreage
to approximately 56.0 to 57.0 million acres, due to excess moisture.
Processing
The Company expects solid contributions from the Processing segment, which has
begun to reflect the benefits of the Company's diversification efforts to grow
its portfolio of food and feed ingredients businesses.
Demand for whole grain nutritional food ingredients continues to remain strong.
With the economic challenges facing North America, management anticipates an
increase in private label/store brand ready-to-eat cereals. The Company expects
that it will benefit from continuing positive demand fundamentals for pasta in
the U.S. market, as that country undergoes a tepid economic recovery and
consumption of pasta as a healthy and economical food source remains strong.
Global malt markets are expected to remain challenged in the near term given
sluggish beer sales in North America and Europe. This has created excess
capacity and is expected to increase competition across the globe and impact
industry margins. For Viterra's malt operations in Australia for the first half
of fiscal 2011, we do not believe we will see immediate returns to the demand
levels experienced prior to the financial crisis, but remain confident in the
long-term outlook for this industry.
Management currently estimates that its food operations within the Processing
segment will generate a gross margin per tonne for fiscal 2011 in the range of
$90 to $110 on a blended margin per tonne basis, which is dependent on crop
quality, yield efficiency and industry supply and demand dynamics.
Fourth Quarter Consolidated Results
----------------------------------------------------------------------------
Fourth Quarter Operating Highlights
(in thousands - except margins)
For the three months ended
October 31, Better
(Unaudited) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Operating Results
Sales and other operating
revenues $ 1,951,692 $ 1,417,139 $ 534,553
Gross profit and net revenues
from services 319,911 159,108 160,803
Operating, general and
administrative expenses (181,953) (118,872) (63,081)
EBITDA (3) 137,958 40,236 97,722
Amortization (54,767) (31,551) (23,216)
EBIT (3) 83,191 8,685 74,506
Integration expenses (1,216) (5,143) 3,927
Gain (loss) on disposal of assets 7,162 (1,192) 8,354
Net foreign exchange gain (loss)
on acquisition 707 16,701 (15,994)
Financing expenses (25,670) (24,143) (1,527)
Net earnings (loss) 52,671 (920) 53,591
Basic and diluted earnings per
share $ 0.14 $ (0.00) $ 0.14
Cash flow provided by (used in)
operating activities (3) 88,020 (15,165) 103,185
Cash flow per share - basic and
diluted (3) $ 0.24 $ (0.05) $ 0.29
Property, plant and equipment
expenditures (33,504) (28,110) (5,394)
Intangible assets expenditures (3,962) (2,706) (1,256)
Grain Handling and Marketing
Segment
Gross profit and net revenues
from services $ 186,916 $ 97,750 $ 89,166
EBITDA 101,984 54,236 47,748
Sales and other operating
revenues 1,421,025 982,823 438,202
Operating Highlights (tonnes) :
North American Shipments 3,841 3,902 (61)
Australian Receivals 20 - 20
Total pipeline 3,861 3,902 (41)
Agri-products Segment
Gross profit and net revenue from
services $ 72,773 $ 40,744 $ 32,029
EBITDA 30,016 7,695 22,321
Sales and other operating
revenues 325,062 246,673 78,389
Fertilizer 163,495 106,098 57,397
Crop Protection 45,399 47,136 (1,737)
Seed 1,461 1,174 287
Wool 48,970 34,825 14,145
Financial Products 8,132 7,828 304
Equipment sales and other revenue 57,605 49,612 7,993
Fertilizer volume (tonnes) 370 261 109
Fertilizer margin ($ per tonne
sold) $ 110.02 $ 72.02 $ 38.00
Processing Segment
Gross profit and net revenues
from services $ 60,222 $ 20,614 $ 39,608
EBITDA 36,420 5,506 30,914
Sales and other operating
revenues 368,305 259,943 108,362
Processing sales volumes (tonnes)
Malt (4) 159 N/A N/A
Pasta 57 N/A N/A
Oats 94 58 36
Canola 49 62 (13)
Feed - North America 424 466 (42)
Feed - New Zealand 45 N/A N/A
Corporate Expenses
EBITDA $ (30,462) $ (27,201) $ (3,261)
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
(4) Includes contributions from Viterra's 42% ownership interest in Prairie
Malt and its wholly owned Australian malt business
In the final quarter of fiscal 2010, Viterra generated $2.0 billion in sales and
other operating revenues, an increase of $534.6 million or 38% from the fourth
quarter of fiscal 2009. The increase was primarily due to a full quarter of
contributions from Viterra Australia, which amounted to $470.7 million compared
to $139.2 million from September 24, 2009 to October 31, 2009. Quarterly sales
were also positively supported by new contributions from the pasta and oat
processing businesses and strong western Canadian fertilizer sales, driven by
favourable weather in the fall.
Consolidated EBITDA for the three months ended October 31, 2010 was $138.0
million, compared to $40.2 million last year. Included in this quarter's results
were $43.0 million in contributions from Viterra's Australian operations. This
compares to a negative contribution of $6.2 million from Viterra Australia in
the last five weeks of fiscal 2009. The remaining EBITDA increase relates mainly
to fertilizer contributions and the additional earnings generated from Viterra's
new processing businesses.
Viterra sold one of its North American grain facilities for $18.2 million in the
final quarter. This resulted in a gain of $6.8 million, which represented the
majority of the $7.2 million of asset disposal gains recorded during the
quarter.
Viterra also recorded a $0.7 million net foreign exchange gain, which was
associated with the acquisition of 21st Century. In 2009, Viterra recorded a
$16.7 million net foreign exchange gain in the fourth quarter associated with
the ABB Grain Limited ("ABB") acquisition.
The consolidated net earnings for the final quarter of 2010 were $52.7 million
($0.14 per share), which compares to a net loss of $0.9 million last year ($0.00
per share).
Cash flow provided by operations before changes in non-cash working capital was
$88.0 million ($0.24 per share) for the three months ended October 31, 2010,
compared to cash flow used in operations of $15.2 million ($0.05 per share) in
the same three months of 2009.
Fourth Quarter Segment Results
Grain Handling and Marketing
Segment EBITDA for the quarter was $102.0 million compared to the $54.2 million
generated in the same period last year. The majority of this increase relates to
the Australian operations, which contributed $33.4 million in the fourth quarter
of 2010, compared to an EBITDA loss of $5.8 million in the last five weeks of
2009. The remaining difference reflects a higher contribution from the
International Grain group of $12.3 million compared to a loss of $0.5 million in
fiscal 2009, as we expanded our global marketing operations. North American
operations had a slightly lower contribution of $56.2 million compared to $60.5
million in the same period of fiscal 2009, which reflected a larger shipping
program industry-wide in that year.
As Viterra's international sales offices opened throughout fiscal 2010, the
associated export commodity positions became the responsibility of the
International Grain group. As such, earnings from those sales are now recorded
as contributions from that group, as opposed to being included within North
American and Australian results.
Viterra's North American shipments for the fourth quarter were 3.8 million
tonnes compared to 3.9 million tonnes shipped in the same period of fiscal 2009.
Despite the year-over-year decrease in crop size, Viterra's performance in the
fourth quarter was strong due to a positive demand and pricing environment for
agricultural commodities. Viterra's port terminal receipts in North America were
2.6 million tonnes, compared to 2.7 million tonnes in the fourth quarter of
2009.
In Australia, grain handling and marketing operations shipped 1.7 million tonnes
of grains, oilseeds and special crops. Strong shipments in the quarter were
attributable to:
-- Attractive commodity prices and favourable international demand for
grains and oilseeds in the period;
-- Anticipation of a large crop in South Australia, which motivated growers
to sell their old crop; and
-- Increasing storage fees in South Australia, which provided an incentive
for growers to sell their grain.
Of the total shipments out of South Australia, Viterra purchased approximately
25% for its own account, similar to the prior quarter. Viterra purchased an
additional 0.7 million tonnes from other regions of Australia, bringing its
total for the year to 5.6 million tonnes. Viterra maintained its discipline
throughout the quarter, focusing on bolstering margins as opposed to simply
increasing market share.
Agri-products
Sales and other operating revenues for the fourth quarter were up 32% to $325.1
million versus $246.7 million in the corresponding period in fiscal 2009.
Fertilizer sales in Western Canada increased by $57.4 million, or 54% due to
favourable weather conditions in the final quarter. The Australian operations
contributed $65.2 million in revenues for the quarter, compared to $39.1 million
for the period from September 24, 2009 to October 31, 2009.
Gross profit increased during the quarter to $72.8 million, compared to $40.7
million a year earlier. The increase is primarily attributable to fertilizer as
higher sales volumes and increased margins per tonne resulted in higher gross
profit. The Company experienced higher margins per tonne on anhydrous ammonia
("NH3"), as selling costs were consistent and natural gas costs were slightly
lower. The majority of the product that was sold was manufactured through
Canadian Fertilizers Limited, which provides Viterra with significantly higher
margins than purchase for resale tonnes.
EBITDA for the Agri-products segment for the quarter was up significantly to
$30.0 million compared to $7.7 million in the final three months of fiscal 2009.
The increase is mainly the result of higher fertilizer sales volumes and
improved margins. Included in the EBITDA results for the quarter are
contributions of $3.4 million from financial products, a slight increase from a
year earlier. The Australian agri-product operations contributed EBITDA of $0.5
million for the quarter, compared to a loss of $1.6 million for the last five
weeks of fiscal 2009.
Processing
Sales in the Processing segment for the fourth quarter were $368.3 million, up
$108.4 million from $259.9 million during the comparable period of 2009. The
year-over-year increase for the fourth quarter primarily reflects:
-- The addition of Dakota Growers, which generated $66.4 million in sales
for the quarter;
-- The acquisition of 21st Century oat processing, which generated strong
incremental sales of $21.1 million and increased the oat operations
revenues to $55.2 million;
-- The addition of the Australian malt business for the entire period,
which generated sales of $67.0 million for the three months ended
October 31, 2010, compared to $33.6 million for the five week period to
October 31, 2009; and
-- The contribution from the New Zealand feed business for the entire
period, which generated sales of $24.1 million for the quarter compared
to $9.3 million for the last five weeks of fiscal 2009.
These positive contributions were, in part, offset by lower sales in Viterra's
North American feed and canola crushing operations.
Gross profit for the Processing segment in the fourth quarter totaled $60.2
million, a significant improvement from the $20.6 million generated in the
fourth quarter of 2009 due to strong contributions from the malt and pasta
operations.
EBITDA for the Processing segment for the quarter was $36.4 million, a
significant increase of $31.0 million from the fourth quarter of fiscal 2009, as
a result of the previously noted pasta and oats acquisitions. While food
processing generated EBITDA of $36.9 million for the fourth quarter, the feed
products operations incurred an EBITDA loss of $0.5 million in the quarter due
to negative contributions from both the North American and New Zealand
operations.
Fiscal 2010 Consolidated Results
A summary of the Company's annual consolidated operating results follows:
----------------------------------------------------------------------------
Selected Consolidated Financial Information
Actual
Twelve Months
(in thousands - except per share ended October 31, Better
amounts) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Sales and other operating
revenues $ 8,256,280 $ 6,631,666 $ 1,624,614
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 1,258,567 $ 839,031 $ 419,536
Operating, general and
administrative expenses (740,984) (515,333) (225,651)
----------------------------------------------------------------------------
EBITDA (3) 517,583 323,698 193,885
Amortization (192,676) (109,141) (83,535)
----------------------------------------------------------------------------
EBIT (3) 324,907 214,557 110,350
Integration expenses (5,449) (10,191) 4,742
Net foreign exchange gain (loss)
on acquisition (159) 24,105 (24,264)
Gain (Loss) on disposal of assets 7,778 (10,314) 18,092
Financing expenses (138,107) (61,163) (76,944)
----------------------------------------------------------------------------
188,970 156,994 31,976
Provision for corporate taxes
Current (27,722) (14,144) (13,578)
Future (15,976) (29,723) 13,747
----------------------------------------------------------------------------
Net earnings (loss) $ 145,272 $ 113,127 $ 32,145
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share $ 0.39 $ 0.45 $ (0.06)
----------------------------------------------------------------------------
Selected Consolidated Financial Information
Actual
(in thousands - except per share Three Months
amounts) ended October 31, Better
2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Sales and other operating
revenues $ 1,951,692 $ 1,417,139 $ 534,553
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 319,911 $ 159,108 $ 160,803
Operating, general and
administrative expenses (181,953) (118,872) (63,081)
----------------------------------------------------------------------------
EBITDA (3) 137,958 40,236 97,722
Amortization (54,767) (31,551) (23,216)
----------------------------------------------------------------------------
EBIT (3) 83,191 8,685 74,506
Integration expenses (1,216) (5,143) 3,927
Net foreign exchange gain (loss)
on acquisition 707 16,701 (15,994)
Gain (Loss) on disposal of assets 7,162 (1,192) 8,354
Financing expenses (25,670) (24,143) (1,527)
----------------------------------------------------------------------------
64,174 (5,092) 69,266
Provision for corporate taxes
Current (15,748) (2,579) (13,169)
Future 4,245 6,751 (2,506)
----------------------------------------------------------------------------
Net earnings (loss) $ 52,671 $ (920) $ 53,591
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share $ 0.14 $ (0.00) $ 0.14
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
Consolidated sales and other operating revenues for the year were $8.3 billion,
an increase of 24% or $1.6 billion from fiscal 2009. The increase in sales was
due to the contribution of $2.3 billion in revenues from Viterra's Australian
operations, which more than offset the effects of lower volumes and commodity
prices on the Company's grain handling and marketing operations in North
America.
Operating, general and administrative ("OG&A") expenses were $741.0 million for
the 12 months ended October 31, 2010, compared to $515.3 million for the
comparable period last year. The increase primarily reflects a full period of
costs associated with the Company's Australian operations. In addition, OG&A
expense includes pension benefit income which was significantly lower for the 12
months ended October 31, 2010 at $5.8 million compared to $23.6 million in 2009.
A reduction in corporate bond rates that are used to value future pension
obligations resulted in an increase in the value of the Company's pension
obligations. Under pension accounting rules, the increase in obligation is
amortized into expense over future periods. However, the increased obligations
also cause the reduction of valuation reserves held against the Company's
pension assets and those reductions are recognized immediately into income. The
amount of valuation reserve available to reduce was lower than in the prior
year, which resulted in less of an impact on the income reported.
During the 12-month period ended October 31, 2010, Viterra generated EBITDA of
$517.6 million, an increase of $193.9 million or 60% from fiscal 2009. The
results for fiscal 2010 include $175.6 million in EBITDA contributions from
Viterra Australia, compared to a $6.2 million loss for the period from September
24, 2009 to October 31, 2009. The remaining increase is mainly attributable to
new pasta and oat processing operations plus strong fertilizer sales in the
fourth quarter.
Amortization for the year was $192.7 million, an increase of $83.5 million from
the prior year, primarily due to the addition of Viterra's Australian assets for
the full 12-month period.
In fiscal 2010, Viterra recorded a $0.2 million net foreign exchange loss
relating to the acquisition of Dakota Growers and 21st Century. In 2009, Viterra
recorded a $24.1 million net foreign exchange gain relating to the acquisition
of ABB.
The Company recorded a $7.8 million gain on disposal of assets related primarily
to the sale of one of its North American grain handling facilities. A number of
other capital assets were sold during the year. This compares to last year's
loss on disposal of assets of $10.3 million, which was related to a number of
capital asset sales.
----------------------------------------------------------------------------
Financing Expenses Actual
Twelve Months
ended October 31,
(in thousands) 2010 (1) 2009 (2) Change
----------------------------------------------------------------------------
Interest on debt facilities $ 112,923 $ 66,010 $ (46,913)
Interest accretion 2,744 2,413 (331)
Amortization of deferred financing
costs 6,882 3,620 (3,262)
----------------------------------------------------------------------------
Financing costs 122,549 72,043 (50,506)
Interest income (7,629) (7,948) (319)
CWB carrying charge recovery (1,693) (2,932) (1,239)
----------------------------------------------------------------------------
Net financing costs for debt
facilities 113,227 61,163 (52,064)
One-time refinancing costs 24,880 - (24,880)
----------------------------------------------------------------------------
Total financing and associated
expenses $ 138,107 $ 61,163 $ (76,944)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
Financing expenses associated with the Company's long-term and short-term debt
increased by $50.5 million in fiscal 2010. The increase in financing expenses in
the period reflects increased debt levels due to the inclusion of Viterra
Australia and additional interest expenses associated with the $300.0 million
note issuance in July 2009. These increases were partially offset by the
reduction of interest expense due to the redemption of the $100.0 million in
senior notes during fiscal 2010, and the repayment of approximately $300.0
million in long-term debt associated with legacy Australian debt, together with
the impact of lower commodity prices on global working capital requirements for
much of the period.
One-time refinancing costs were $24.9 million ($17.7 million after tax) of which
$16.5 million was related to costs associated with the settlement of interest
rate swaps related to the Term Credit Facility and the early redemption premium
paid on the $100 million in Senior Unsecured Notes. Also included in the costs
were $8.4 million of non-cash items associated with deferring financing costs
expensed as a result of retiring the previous debt facilities.
Viterra recorded a net corporate tax provision of $43.7 million in the 12-month
period ended October 31, 2010 compared to a provision of $43.9 million in the
same period of 2009. The effective tax rate for the 12 months ended October 31,
2010 was 23.1%, compared to 27.9% for the same period last year. The Company's
effective tax rate ordinarily differs from the estimated Canadian statutory rate
of 29% due to a variety of factors, including the change in future tax rates
applied to different tax assets and tax liabilities, items deductible for tax in
excess of accounting, as well as the effect of foreign income tax rates
differing from Canadian income tax rates.
Viterra's net earnings for the year were up 28.4% to $145.3 million compared to
$113.1 million last year. However, earnings per share were $0.39 in the current
year compared to $0.45 per share in fiscal 2009. This reflects an increase in
the weighted average number of shares outstanding. For the fiscal year ended
October 31, 2010, the weighted average number of shares outstanding was 371.6
million, compared to 251.4 million at the end of fiscal 2009.
Fiscal 2010 Segment Results
The following table provides a breakdown of EBITDA by operating segment:
----------------------------------------------------------------------------
Breakdown of EBITDA By Segment (3) Actual
Twelve Months
ended October 31, Better
(in thousands) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Grain Handling and Marketing $ 386,105 $ 247,922 $ 138,183
Agri-products 153,822 132,255 21,567
Processing 104,256 36,549 67,707
Corporate (126,600) (93,028) (33,572)
----------------------------------------------------------------------------
$ 517,583 $ 323,698 $ 193,885
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Breakdown of EBITDA By Segment (3) Actual
Three Months
ended October 31, Better
(in thousands) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Grain Handling and Marketing $ 101,984 $ 54,236 $ 47,748
Agri-products 30,016 7,695 22,321
Processing 36,420 5,506 30,914
Corporate (30,462) (27,201) (3,261)
----------------------------------------------------------------------------
$ 137,958 $ 40,236 $ 97,722
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
Grain Handling and Marketing
This year's segment results include a full 12 months from the Company's Grain
Handling and Marketing operations in Australia. The prior year's results include
approximately five weeks of results from the Company's Grain Handling and
Marketing operations in Australia, from September 24, 2009 to October 31, 2009.
----------------------------------------------------------------------------
Grain Handling and Marketing Actual
Twelve Months
ended October 31, Better
(in thousands - except margins) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 724,127 $ 437,741 $ 286,386
Operating, general and
administrative expenses (338,022) (189,819) (148,203)
----------------------------------------------------------------------------
EBITDA (3) 386,105 247,922 138,183
Amortization (98,680) (46,084) (52,596)
----------------------------------------------------------------------------
EBIT (3) $ 287,425 $ 201,838 $ 85,587
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total sales and other operating
revenues $ 5,651,399 $ 4,176,840 $ 1,474,559
North American Industry
Statistics (tonnes)
Canadian Industry Receipts - six
major grains 33,832 35,760 (1,928)
Canadian Industry Shipments - six
major grains 33,856 35,379 (1,523)
Canadian Industry Terminal Handle 24,694 25,812 (1,118)
Viterra - North American
Operations (tonnes)
Elevator receipts 15,278 16,325 (1,047)
Elevator shipments 15,834 16,967 (1,133)
Port terminal receipts 10,271 10,434 (163)
Viterra - Australian Operations
(tonnes)
Shipments 5,214 - N/A
Receivals 6,226 - N/A
Consolidated Global Pipeline
(tonnes)
North American shipments 15,834 16,967 (1,133)
Australian receivals 6,226 - N/A
----------------------------------------------------------------------------
Total pipeline 22,060 16,967 5,093
Consolidated pipeline margin (per
tonne) $ 32.83 $ 25.80 $ 7.03
----------------------------------------------------------------------------
Grain Handling and Marketing Actual
Three Months
ended October 31, Better
(in thousands - except margins) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 186,916 $ 97,750 $ 89,166
Operating, general and
administrative expenses (84,932) (43,514) (41,418)
----------------------------------------------------------------------------
EBITDA (3) 101,984 54,236 47,748
Amortization (25,796) (14,522) (11,274)
----------------------------------------------------------------------------
EBIT (3) $ 76,188 $ 39,714 $ 36,474
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total sales and other operating
revenues $ 1,421,025 $ 982,823 $ 438,202
North American Industry
Statistics (tonnes)
Canadian Industry Receipts - six
major grains 7,945 8,244 (299)
Canadian Industry Shipments - six
major grains 8,241 8,249 (8)
Canadian Industry Terminal Handle 6,427 6,427 -
Viterra - North American
Operations (tonnes)
Elevator receipts 3,622 3,896 (274)
Elevator shipments 3,841 3,902 (61)
Port terminal receipts 2,623 2,714 (91)
Viterra - Australian Operations
(tonnes)
Shipments 1,665 - N/A
Receivals 20 - N/A
Consolidated Global Pipeline
(tonnes)
North American shipments 3,841 3,902 (61)
Australian receivals 20 - N/A
----------------------------------------------------------------------------
Total pipeline 3,861 3,902 (41)
Consolidated pipeline margin (per
tonne) N/A N/A N/A
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
Gross profit for the segment totaled $724.1 million in fiscal 2010, an increase
of 65%, compared to $437.7 million in fiscal 2009 due to the Australian grain
handling and marketing contribution of $290.0 million. The Australian results
for the year are indicative of strong shipping volumes and merchandising margins
in the latter half of the fiscal year.
The Company shipped 15.8 million tonnes of western Canadian grains and oilseeds,
down slightly from last year's all-time record of 17.0 million tonnes. In South
Australia, Viterra received about 6.2 million tonnes of grains, oilseeds and
special crops primarily in the first quarter of the fiscal year. These
receivals, combined with 0.7 million tonnes of carry-in stock at the beginning
of the fiscal year created ample shipments for Viterra's South Australia system.
Commodity prices strengthened in the second half of the year as concerns over
agricultural production in major growing regions emerged and significant merger
and acquisition activity around the world renewed interest in the agricultural
sector as a whole. Our consolidated global pipeline margin for the Grain
Handling and Marketing segment averaged $32.83 per tonne for the year,
consistent with management's guidance of $30 to $33 per tonne.
OG&A expenses for the segment were $338.0 million compared to $189.8 million in
fiscal 2009. The increase primarily reflects the addition of the Australian
operations this year. In addition, the North American operations had a $16.8
million reduction in pension income. Excluding these two items, our OG&A
expenses remained on par with the prior year even with salary increases,
reflecting the Company's efforts to effectively manage its North American cost
structure.
Segment EBITDA was $386.1 million in 2010, an increase of $138.2 million from
the $247.9 million generated in fiscal 2009. The increase is primarily due to
the $162.4 million contribution from the Australian grain handling and marketing
operations during the 12-month period, compared to an EBITDA loss of $5.8
million for the period between September 24, 2009 and October 31, 2009. North
American EBITDA contributions for the period were $203.9 million, down from
$255.6 million in fiscal 2009, as lower sales volumes and less pension income
reduced EBITDA contributions from these operations by about $30 million and
$16.8 million, respectively. The International Grain group contributed $19.8
million for the period, compared to a loss of $1.8 million in fiscal 2009. As
Viterra's international sales offices opened throughout fiscal 2010, the
associated export commodity positions became the responsibility of the
International Grain group. As such, earnings from those sales are now recorded
as contributions from that group, as opposed to being included within North
American and Australia results.
Agri-products
----------------------------------------------------------------------------
Agri-products Actual
Twelve Months
(in thousands - except ended October 31, Better
percentages and margins) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 350,102 $ 294,200 $ 55,902
Operating, general and
administrative expenses (196,280) (161,945) (34,335)
----------------------------------------------------------------------------
EBITDA (3) 153,822 132,255 21,567
Amortization (46,314) (42,434) (3,880)
----------------------------------------------------------------------------
EBIT (3) $ 107,508 $ 89,821 $ 17,687
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Highlights
Sales and other operating
revenues $ 1,796,537 $ 1,649,917 $ 146,620
Fertilizer 791,124 899,636 (108,512)
Crop Protection 384,186 406,876 (22,690)
Seed 207,395 184,432 22,963
Wool 264,899 34,825 230,074
Financial Products 25,732 20,455 5,277
Equipment sales and other revenue 123,201 103,693 19,508
Margin (% of sales excluding
fertilizer) 17.9% 22.1% (4.2 pt)
Fertilizer volume (tonnes) 1,750 1,534 216
Fertilizer margin ($ per tonne
sold) $ 97.36 $ 83.76 $ 13.60
----------------------------------------------------------------------------
Agri-products Actual
Three Months
(in thousands - except ended October 31, Better
percentages and margins) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 72,773 $ 40,744 $ 32,029
Operating, general and
administrative expenses (42,757) (33,049) (9,708)
----------------------------------------------------------------------------
EBITDA (3) 30,016 7,695 22,321
Amortization (11,926) (10,647) (1,279)
----------------------------------------------------------------------------
EBIT (3) $ 18,090 $ (2,952) $ 21,042
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Highlights
Sales and other operating
revenues $ 325,062 $ 246,673 $ 78,389
Fertilizer 163,495 106,098 57,397
Crop Protection 45,399 47,136 (1,737)
Seed 1,461 1,174 287
Wool 48,970 34,825 14,145
Financial Products 8,132 7,828 304
Equipment sales and other revenue 57,605 49,612 7,993
Margin (% of sales excluding
fertilizer) N/A N/A N/A
Fertilizer volume (tonnes) 370 261 109
Fertilizer margin ($ per tonne
sold) $ 110.02 $ 72.02 $ 38.00
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
Agri-products sales for fiscal 2010 were $1.8 billion, an increase of $146.6
million or about 9% from the prior fiscal year. The increase relates to
Viterra's Australian agri-product operations that contributed $337.9 million in
revenue, which is primarily derived from the Company's domestic and export wool
business. Sales through Viterra's North American agri-product operations of $1.5
billion compared to $1.6 billion partially offset this increase due to lower
fertilizer prices.
Fertilizer sales were $791.1 million for the year, down $108.5 million compared
to the same period of 2009. The year-over-year decrease in fertilizer sales was
due to lower average fertilizer sales prices throughout the first three quarters
of fiscal 2010.
Fertilizer sales volumes were 1.8 million tonnes for the 12 months ended October
31, 2010, an increase of 216,000 tonnes from fiscal 2009, of which 118,000
tonnes related to Australian agri-products operations. North American sales
volumes were slightly higher than last year as strong October sales offset lower
third quarter volumes, which were hampered by excessive rain that resulted in
large amounts of unseeded acres across Western Canada. Above normal temperatures
through October allowed for harvest to be completed and significant NH3
applications.
Consolidated Fertilizer Volumes by Quarter (in thousands of tonnes)
For the quarter ended
Fiscal year 31-Jan 30-Apr 31-Jul 31-Oct Total
----------------------------------------------------------------------------
2010(1) 310 371 699 370 1,750
2009(2) 269 247 757 261 1,534
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
Seed sales for the year were $207.4 million, up about 13% from $184.4 million in
fiscal 2009. The increase reflects higher canola seed sales and the impact of a
revaluation by third-party suppliers for bundled crop protection products that
now favour seed, which more than offset the loss of seed sales in the spring due
to the decrease in seeded acres across Western Canada.
Sales of Viterra's North American crop protection products decreased by 5.6%, or
$22.7 million, to $384.2 million this year. The decrease was primarily due to
the wet weather, which reduced demand for herbicides during much of the growing
season. In addition, lower demand, the aforementioned third- party product
revaluation and product devaluation caused selling prices to drop. Despite the
aforementioned issues, crop protection product sales in the fiscal year
benefited from several factors including:
-- Increased fungicide usage due to the wet conditions present throughout
Western Canada;
-- Increased glyphosate sales volumes as producers controlled unwanted
growth on fallow land and encouraged fall maturation given the late
harvest; and
-- Increased sales volumes as Viterra has expanded its retail network
across Western Canada, acquiring seven agri-product retail locations
since the third quarter of 2009.
Equipment sales and other revenue were up by $19.5 million from 2009. The
increase in sales primarily reflected strong demand for on-farm storage and
related products, such as grain storage and aeration equipment.
Gross profit for the segment was $350.1 million for the year, which was $55.9
million higher than the $294.2 million recorded in fiscal 2009. The increase in
gross profit for the year was primarily driven by additional fertilizer
contributions in the North American business due to a 6% year-over-year increase
in sales volumes and a 21% year-over-year increase in margins per tonne.
Fertilizer margins (representing combined retail, wholesale and manufacturing
margins) were $97.36 per tonne in fiscal 2010 compared to $83.76 per tonne last
year. In 2009, gross profit included an inventory write-down of $28.1 million.
In addition, lower average natural gas prices in 2010 ($4.16 per GJ compared to
$4.88 per GJ in 2009) contributed to higher margins for fiscal 2010.
Excluding fertilizer contributions, gross margins for the North American
agri-product operations were similar to those in fiscal 2009. Agri-product
segment margins, excluding fertilizer, decreased on a year- over-year basis due
to the contribution of lower margin Australian wool revenues. Gross profit
contributions for crop protection products were comparable with fiscal 2009, as
increased volumes from glyphosate and fungicide products offset the impact of
the lower pricing environment for grass herbicide products.
OG&A expenses for the fiscal year were $196.3 million, compared to $161.9
million a year earlier. The primary driver for the increase in OG&A expenses was
the addition of the Australian agri-product operations for the entire period.
For the North American operations, a significant portion of the increase in OG&A
expenses related to costs associated with newly acquired agri-retail locations
and higher salary and benefit costs. In addition, inventory distribution costs
increased as the wet weather required the movement of product to the locations
where it was needed. Excluding the impact of the aforementioned items, North
American agri-product OG&A expenses were up approximately 4.0% from fiscal 2009.
EBITDA for the year was up 16% to $153.8 million, compared to $132.3 million in
the prior year primarily due to increased fertilizer margins, offset in part by
higher OG&A expenses.
Processing
----------------------------------------------------------------------------
Processing Actual
Twelve Months
ended October 31, Better
(in thousands - except margins) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Gross profit and net revenues
from services $ 184,338 $ 107,090 $ 77,248
Operating, general and
administrative expenses (80,082) (70,541) (9,541)
----------------------------------------------------------------------------
EBITDA (3) 104,256 36,549 67,707
Amortization (41,592) (19,339) (22,253)
----------------------------------------------------------------------------
EBIT (3) $ 62,664 $ 17,210 $ 45,454
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales and other operating
revenues $ 1,296,171 $ 942,561 $ 353,610
Operating Highlights - Food
Food sales volumes (tonnes)
Malt (4) 562 N/A N/A
Pasta 112 N/A N/A
Oats 257 213 44
Canola 229 75 154
Feed - North America 1,918 2,006 (88)
Feed - New Zealand 145 N/A N/A
Operating margin ($ per tonne sold)
Malt (4) $ 97.99 N/A N/A
Pasta 320.76 N/A N/A
Oats 96.19 90.01 6.18
Canola 10.62 56.76 (46.14)
Feed - North America 29.91 34.40 (4.49)
Feed - New Zealand 60.88 N/A N/A
----------------------------------------------------------------------------
Processing Actual
Three Months
ended October 31, Better
(in thousands - except margins) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Gross profit and net revenues from
services $ 60,222 $ 20,614 $ 39,608
Operating, general and
administrative expenses (23,802) (15,108) (8,694)
----------------------------------------------------------------------------
EBITDA (3) 36,420 5,506 30,914
Amortization (15,522) (5,721) (9,801)
----------------------------------------------------------------------------
EBIT (3) $ 20,898 $ (215) $ 21,113
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales and other operating
revenues $ 368,305 $ 259,943 $ 108,362
Operating Highlights - Food
Food sales volumes (tonnes)
Malt (4) 159 N/A N/A
Pasta 57 N/A N/A
Oats 94 58 36
Canola 49 62 (13)
Feed - North America 424 466 (42)
Feed - New Zealand 45 N/A N/A
Operating margin ($ per tonne sold)
Malt (4)
Pasta
Oats
Canola
Feed - North America
Feed - New Zealand
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
(4) Includes contributions from Viterra's 42% ownership interest in Prairie
Malt and its wholly owned Australian malt business
Sales in the Processing segment for the fiscal year were $1.3 billion, up $353.6
million or 38% from $942.6 million during the comparable period of 2009. The
increase from fiscal 2009 primarily reflects:
-- The addition of the Dakota Growers pasta processing business on May 5,
2010 that generated $125.3 million in sales for the period;
-- The acquisition of the 21st Century oat processing business in August of
2010, which added $21.1 million in sales;
-- The addition of the Australian malt business, which generated sales of
$269.7 million in the fiscal year; and
-- The addition of the New Zealand feed business for the entire period that
added sales of $72.4 million for the fiscal year.
Gross profit for the Processing segment totaled $184.3 million, a significant
increase from the $107.1 million earned in fiscal 2009.
Malt contributed $55.1 million in gross profit for the year. Sales volumes were
strong despite weakness in the global malt market. Total sales volumes,
including contributions from the Company's 42% share in Prairie Malt, were
562,000 tonnes for the year. Margins showed some temporary stabilization in the
fourth quarter and averaged $97.99 per tonne for the year.
The Dakota Growers business generated impressive results and earned $35.9
million in gross profit since it was acquired on May 5, 2010. Sales volumes for
this business were 112,000 tonnes and margins were $320.76 per tonne.
Oat processing earned $24.7 million in gross profit for the year, compared to
$19.2 million a year ago, an increase that is mainly attributable to the
acquisition of 21st Century in the fourth quarter of 2010. This acquisition
increased sales volumes from 213,000 tonnes in fiscal 2009 to 257,000 tonnes in
the current year. Margins also improved and averaged $96.19 per tonne, compared
to $90.01 in fiscal 2009, as 21st Century contributions are from higher margin
coated and clustered oat products.
The canola business had a challenging year and recorded a gross profit of $2.4
million compared to gross profit of $4.3 million last year. Operational
difficulties and the onset of new crush capacity in Western Canada eroded
margins. As a result, margins for this business averaged $10.62 per tonne in the
current year compared to $56.76 per tonne in fiscal 2009. Crush volumes were
229,000 tonnes, reflecting an entire year of operations for this business.
The feed business in North America contributed $57.4 million to gross profit
during the year. Margins were $29.91 per tonne compared to $34.40 per tonne in
fiscal 2009, reflecting slower demand in the U.S. dairy market, which has yet to
see dairy producers increase their purchase of complex feeds. In Canada,
favorable fall weather caused a slower build up of inventory in cattle feed lots
and resulted in a reduction in sales volumes late in the period.
New Zealand feed recorded $8.8 million in gross profit for fiscal 2010. Margins
were strong at $60.88 per tonne, reflecting the positive impact in demand from
the dairy market as dry conditions eroded pastures and subsequently increased
volumes of required processed feed.
Overall, segment OG&A expenses for fiscal 2010 were $80.1 million, compared to
$70.5 million the prior year. Despite the addition of the newly acquired pasta
and oat processing operations, North American OG&A expenses were $66.1 million,
compared to $69.3 million a year earlier. The lower costs reflect management's
efforts to integrate the feed products' business processes between Canada and
the U.S. and leverage shared expertise. OG&A expense for the New Zealand feed
products and Australia food processing were $6.5 million and $7.5 million,
respectively.
EBITDA for the Processing segment for the year was $104.3 million, an increase
of $67.7 million from fiscal 2009. EBITDA from food processing was $86.9
million, which is a significant improvement from the $23.8 million generated in
2009. This increase was mainly attributable to the addition of the Dakota
Growers operation that contributed $28.9 million since it was acquired on May 5,
2010. The Australia malt operation contributed $38.9 million in the fiscal year,
while the oat and canola businesses in North American generated $17.2 million
and a loss of $5.8 million, respectively.
Feed products contributed EBITDA of $17.3 million in the fiscal year, which
compares positively to the $12.8 million generated in 2009. The New Zealand feed
operations contributed EBITDA of $2.3 million in the period.
Corporate Expenses
----------------------------------------------------------------------------
Corporate expenses Actual
Twelve Months
ended October 31, Better
(in thousands) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Operating, general and
administrative expenses $ (126,600) $ (93,028) $ (33,572)
Amortization (6,090) (1,284) (4,806)
----------------------------------------------------------------------------
EBIT (3) $ (132,690) $ (94,312) $ (38,378)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Corporate expenses Actual
Three Months
ended October 31, Better
(in thousands) 2010 (1) 2009 (2) (Worse)
----------------------------------------------------------------------------
Operating, general and
administrative expenses $ (30,462) $ (27,201) $ (3,261)
Amortization (1,523) (661) (862)
----------------------------------------------------------------------------
EBIT (3) $ (31,985) $ (27,862) $ (4,123)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes results for Viterra Australia's operations for the entire
period
(2) Includes results for Viterra Australia's operations from September 24,
2009 to Oct 31, 2009
(3) See Non-GAAP Measures at the end of this release
Corporate expenses were $126.6 million for fiscal 2010, up $33.6 million from
the previous year's expenses of $93.0 million. This increase was primarily due
to the addition of Viterra Australia for the entire fiscal year 2010. In
addition, higher costs were incurred in establishing the enhancement of
information technology service delivery, as well as higher accruals for the
short-term incentive program. Amortization in the segment increased by $4.8
million mainly due to Viterra Australia but also due to the amortization of
intangible information technology assets capitalized in North America.
Non-GAAP Measures
EBITDA - Earnings before financing expenses, taxes, amortization, gain (loss) on
disposal of assets, integration expenses, and net foreign exchange gain (loss)
on acquisition and EBIT - Earnings before financing expenses, taxes, gain (loss)
on disposal of assets, integration expenses, and net foreign exchange gain
(loss) on acquisition are non-GAAP measures. Those items excluded in the
determination of EBITDA and EBIT represent items that are non-cash in nature,
income taxes, financing expenses or are otherwise not considered to be in the
ordinary course of business. These measures are intended to provide further
insight with respect to Viterra's financial results and to supplement its
information on earnings (losses) as determined in accordance with GAAP.
EBITDA is used by management to assess the cash generated by operations, and
EBIT is a measure of earnings from operations prior to financing costs and
taxes. Both measures also provide important management information concerning
business segment performance since the Company does not allocate financing
expenses, income taxes or other excluded items to these individual segments.
EBITDA to cash interest is defined as EBITDA divided by cash interest where cash
interest is net financing expenses excluding refinancing costs less non-cash
financing expenses. The ratio is calculated on a rolling twelve-month basis.
This measure is intended to assess interest coverage and the Company's ability
to service its interest bearing debt.
Total debt, net of cash and cash equivalents, is provided to assist investors
and is used by management to assess the Company's liquidity position and to
monitor how much debt the Company has after taking into account its liquid
assets, such as cash and cash equivalents. Such measures should not be used in
isolation of, or as a substitute for, current liabilities, short-term
borrowings, or long-term debt as a measure of the Company's indebtedness.
Cash flow provided by operations is the cash from (or used in) operating
activities, excluding non-cash working capital changes. Viterra uses cash flow
provided by operations and cash flow provided by operations per share as a
financial measure for the evaluation of liquidity. Management believes that
excluding the seasonal swings of non-cash working capital assists their
evaluation of long-term liquidity.
Free cash flow is cash flow provided by operations (prior to any changes in
non-cash working capital) net of capital expenditures, excluding business
acquisitions. Free cash flow is used by management to assess liquidity and
financial strength. This measurement is also useful as an indicator of the
Company's ability to service its debt, meet other payment obligations and make
strategic investments. Readers should be aware that free cash flow does not
represent residual cash flow available for discretionary expenditures.
These non-GAAP measures should not be considered in isolation of, or as a
substitute for, GAAP measures such as (i) net earnings (loss), as an indicator
of the Company's profitability and operating performance or (ii) cash flow from
or used in operations, as a measure of the Company's ability to generate cash.
Such measures do not have any standardized meanings prescribed by GAAP and are,
therefore, unlikely to be comparable to similar measures presented by other
corporations.
Forward-Looking Information
Certain statements in this press release are forward-looking statements and
reflect Viterra's expectations regarding future results of operations, financial
condition and achievements. All statements that address activities, events or
developments that Viterra or its management expects or anticipates will or may
occur in the future, including such things as growth of its business and
operations, competitive strengths, strategic initiatives, planned capital
expenditures, plans and references to future operations and results, critical
accounting estimates and expectations regarding future capital resources and
liquidity of the Company and other such matters, are forward-looking statements.
In addition, when used in this release the words "believes", "intends",
"anticipates", "expects", "estimates", "plans", "likely", "will", "may",
"could", "should", "would", "outlook", "forecast", "objective", "continue" (or
the negative thereof) and words of similar import may indicate forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
and achievements of Viterra to be materially different from any future results,
performance and achievements expressed or implied by those forward-looking
statements. The risks include, but are not limited to, those factors discussed
in the Company's MD&A for the year ended October 31, 2010 under the heading
"Risks and Risk Management". The uncertainties and other factors include, but
are not limited to, weather risk; food and feed product safety risk; commodity
price and trading risk; sovereign and political risk; capital market risk;
liquidity risk; financial reporting risk; credit risk; foreign exchange risk;
interest rate risk; merger and acquisition risk; regulatory risk; corporate and
social responsibility risk; third-party relationship risk; information
technology risk; talent management and succession planning risk; and employees
relations risk. Many of these risks, uncertainties and other factors are beyond
the control of the Company. All of the forward-looking statements made in this
press release are qualified by these cautionary statements and the other
cautionary statements and factors contained herein and there can be no assurance
that the actual developments or results anticipated by the Company and its
management will be realized or, even if substantially realized, that they will
have the expected consequences for, or effects on, the Company.
Although Viterra believes the assumptions inherent in forward-looking statements
are reasonable, undue reliance should not be placed on these statements, which
only apply as of the date of this press release. In addition to other
assumptions identified in this press release, assumptions have been made
regarding, among other things:
-- western Canadian and southern Australian crop production and quality in
2010 and subsequent crop years;
-- the volume and quality of grain held on-farm by producer customers in
North America;
-- movement and sales of Board grains by the CWB;
-- the amount of grains and oilseeds purchased by other marketers in
Australia;
-- demand for and supply of open market grains;
-- movement and sale of grain and grain meal in Australia and New Zealand,
particularly in the Australian states of South Australia, Victoria and
New South Wales;
-- agricultural commodity prices;
-- general financial conditions for western Canadian and South Australian
agricultural producers;
-- demand for seed grain, fertilizer, chemicals and other agri-products;
-- market share of grain deliveries and agri-products sales that will be
achieved by Viterra;
-- extent of customer defaults in connection with credit provided by
Viterra, its subsidiaries or a Canadian chartered bank in connection
with feed product and agri-products purchases;
-- ability of the railways to ship grain to port facilities for export
without labour or other service disruptions;
-- demand for oat, canola and malt barley products, and the market share of
sales of these products that will be achieved by Viterra;
-- ability to maintain existing customer contracts and relationships;
-- the availability of feed ingredients for livestock;
-- cyclicality of livestock prices;
-- demand for wool and the market share of sales of wool production that
will be achieved by Viterra's subsidiaries in Australia;
-- the impact of competition;
-- environmental and reclamation costs;
-- the ability to obtain and maintain existing financing on acceptable
terms; and
-- currency, exchange and interest rates.
The preceding list is not exhaustive of all possible factors. All factors should
be considered carefully when making decisions with respect to Viterra.
To the extent any forward-looking statements constitute future-oriented
financial information or financial outlooks, as those terms are defined under
applicable Canadian securities laws, such statements are being provided to
describe the current anticipated potential of the Company and readers are
cautioned that these statements may not be appropriate for any other purpose,
including investment decisions.
Viterra disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
developments or otherwise, except as required by Canadian securities laws.
About Viterra
Viterra provides premium quality ingredients to leading global food
manufacturers. Headquartered in Canada, the global agribusiness has extensive
operations across Canada, the United States, Australia, and New Zealand. Our
growing international presence also extends to offices in Japan, Singapore,
China, Switzerland, Italy, Ukraine and Germany. Driven by an entrepreneurial
spirit, we operate in three distinct businesses: grain handling and marketing,
agri-products, and processing. Viterra's expertise, close relationships with
producers, and superior logistical assets allow the Company to consistently meet
the needs of the most discerning end-use customers, helping to fulfill the
nutritional needs of people around the world.
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