Viterra (VT.TO), a leading Canadian farm supplier and grain handler, said quarterly profit fell on a writedown but brisk spending on fertilizer and seed helped the results top expectations.
Shares of the Regina, Saskatchewan-based company rose after it said sales volumes jumped even as profit margins sagged. Farmers, aiming to capitalize on higher commodity prices, bought inputs such as fertilizer with rising income from a bountiful crop. Meanwhile, grain shipments handled by Viterra increased.
“Volumes remain very strong, performance remains very strong and we don’t expect that to change,” CEO Mayo Schmidt said in a conference call with analysts.
Profit dropped to C$26.3 million ($23.9 million), or 11 Canadian cents a share, in the three months ended April 30. That compares to a profit of C$33.6 million, or 16 Canadian cents, a year earlier.
The decline largely reflected an C$8 million writedown on four grain elevators Viterra is closing.
Excluding the writedown, earnings would have come in at C$32 million, or 14 Canadian cents a share, said spokewoman Colleen Vancha.
Analysts, on average, had expected the company to report earnings excluding one-time items of 8 Canadian cents a share, according to Reuters Estimates.
Sales and operating revenues for the quarter rose to C$1.6 billion from C$1.5 billion. Grain handling shipments climbed 36 percent, but profit margins fell 24 percent to C$27.22 per tonne due to price volatility.
Agri-products sales, which include seed, fertilizer and herbicide, rose 31 percent to C$266 million.
“Farmers are really moving product and we believe that’s a function of the better grain prices,” said Robert Winslow, an analyst with Wellington West Capital Markets. “Farmers are feeling better about themselves.”
Viterra shares were up 62 Canadian cents at C$10 on the Toronto Stock Exchange early afternoon on Wednesday.
Viterra has agreed to buy ABB Grain Ltd (ABB.AX). for $1.2 billion in a cash and share deal to gain access to Asian markets, subject to ABB shareholders’ approval.
Chief Executive Schmidt said the ABB deal is the company’s focus, but that more possibilities should arise in the next two to three years.
“I wouldn’t rule out the possibility of opportunities existing right here in Canada and the U.S.”