Viterra: Announces Strong Second Quarter Results

Regina / CA. (vi) Positive contributions from all business segments during the second quarter resulted in Viterra Inc. generating net income in line with last year´s results. Consolidated net earnings of 26,3 million CAD (0,11 CAD per share), which included an 8,0 million CAD loss primarily related to the disposal of assets for the quarter, compared to prior year net earnings of 33,6 million CAD (0,16 CAD per share).

During the quarter, Canadian Viterra generated consolidated earnings before interest, taxes, amortization, integration expenses and gains on disposals of assets (EBITDA) of 85,4 million CAD, compared to EBITDA of 78,5 million CAD for the same quarter of 2008. For the six months ended April 30, 2009, EBITDA was 79,0 million CAD compared to 159,8 million CAD last year reflecting lower Agri-products EBITDA, which included a fertilizer inventory write-down in the first quarter.

«The second quarter results reflect our position within the marketplace as Canada´s leading agri-business. Given our logistics capabilities and efficient infrastructure, we were able to outperform the industry in terms of primary grain shipments during the period. Margins are robust and we expect a solid performance from our grain business for the remainder of the year», said President and Chief Executive Officer Mayo Schmidt. «Agri-products sales gained momentum during the quarter and we expect third quarter demand to strengthen. Our employees and crop specialists are well prepared to meet the seasonally strong buying requirements of farm customers during this very busy period».

First Half 2009

For the six-month period ended April 30, 2009, Viterra had a net loss of 6,6 million CAD (0,03 CAD per share) compared to net earnings of 74,8 million CAD (0,37 CAD per share) in the same six-month period of 2008. The variance reflects the impact that the weakened global economy had on fertilizer margins. Viterra´s net earnings for this year´s first six months were 18,8 million CAD (0,08 CAD per share), excluding the 28,1 million CAD inventory write-down taken in the first quarter and the loss on disposal.

On May 19, 2009, Viterra announced that it had signed an Implementation Agreement to combine its operations with Australian-based ABB Grain Limited. Under the terms, Viterra would acquire all the issued and outstanding shares of ABB for 1,4 billion CAD (1,6 billion AUD). The offer is fully supported by both Boards of Directors and is comprised of a combination of cash and shares, including a special dividend to be paid by ABB.

Mayo Schmidt: «We believe this transaction with ABB will drive significant value for all shareholders, destination customers and growers. With demand for core commodities forecast to increase by 20 percent over the next ten years, dual origination from Australia and Canada is a significant competitive advantage in serving this growing demand. We are creating a global leader and supplier of key food ingredients and food production to the world. The combined company will be financially stronger and better able to access capital to meet the growing demands of the international marketplace».

ABB will propose a Scheme of Arrangement for the acquisition of its shares by Viterra. The transaction is subject to satisfaction of a number of customary closing conditions, including the receipt of required regulatory approvals and court approvals, as well as the approval of ABB shareholders.

Also following the close of the quarter, Viterra successfully completed the offering of 450 million CAD in equity through a bought deal subscription receipt offering by way of a private placement to exempt purchasers. The proceeds of the offering will provide a portion of the funding that may be required to complete the ABB transaction. The price of the issue was 8,00 CAD per subscription receipt. Each subscription receipt gives the holder the right to receive, for no additional consideration, one common share of Viterra upon the successful closing of the ABB Transaction.

Financial and Operating Highlights:

Consolidated sales and other operating revenues climbed 82,7 million CAD to 1,6 billion CAD for the second quarter, up from 1,5 billion CAD in the same period last year. Higher sales led to stronger gross margin and EBITDA for the quarter. On a year-to-date basis, consolidated sales and other operating revenues were 3,0 billion CAD; an increase of 0,2 billion CAD over the 2,8 billion CAD reported for the six months ended April 30, 2008.

• Total shipments in the Grain Handling and Marketing segment were up 36,7 percent over the prior year, contributing 77,0 million CAD of EBITDA for the quarter and 124,9 million CAD for the six months ended April 30, 2009. This compares to 77,6 million CAD of EBITDA for the second quarter of 2008 and 150,6 million CAD of EBITDA for the six months ended April 30, 2008.
• Grain handling margins were 27,22 CAD per tonne for the second quarter compared to 36,00 CAD per tonne in the same quarter a year ago. Year-to-date gross margins were 26,43 per tonne, in line with management´s expectations.
• Sales and other operating revenue for the Agro-products segment were 266,0 million CAD for the second quarter of 2009 and 452,1 million CAD for the six months ended April 30, 2009. This compares to 202,5 million CAD and 368,4 million CAD for the respective three and six-month periods of last year. Stronger sales in both periods are a result of stronger volumes in fertilizer, seed and equipment and higher fertilizer prices relative to the same period last year, EBITDA for the quarter was 15,4 million CAD and for the six months was a loss of 27,8 million CAD, which compares to 12,3 million CAD and 30,4 million CAD respectively.
• Sales in the Agro-food Processing segment for the quarter were 54,8 million CAD, up 2,7 million CAD from the comparable period of 2008, reflecting higher average sales prices offset partially by lower sales volumes. On a year-to-date basis, sales were 103,2 million CAD, up 8,0 million CAD from the comparable period of 2008. Segment EBITDA for the quarter was 5,0 million CAD, compared to 12,8 million CAD for the same period of the prior year. For the six months ended April 30, 2009, EBITDA was 7,5 million CAD, compared to EBITDA of 13,5 million CAD for the same period of the prior year.
• The Livestock Feed and Services segment generated feed sales of 173,6 million CAD for the three months ended April 30, 2009, which compares to 123,8 million CAD in the comparable period of 2008. The increase is primarily due to the contributions from feed manufacturing plants that Viterra acquired during fiscal 2008. Segment EBITDA for the quarter was 4,6 million CAD, compared to an EBITDA loss of 3,1 million CAD for the same period of the prior year. For the six months ended April 30, 2009, EBITDA was 13,8 million CAD, compared to 2,3 million CAD last year.
• For Viterra´s Financial Products segment, second quarter and year-to-date EBITDA was 2,8 million CAD and 4,9 million CAD, respectively compared to EBITDA of 0,8 million CAD and 1,9 million CAD for the respective periods of 2008.
• Corporate expenses decreased by 2,5 million CAD from the same three-month period last year, a reflection of lower accruals for the Company´s incentive plans as well as lower capital taxes, partially offset by an unrealized foreign exchange marked-to-market loss of 0,8 million CAD and higher external consulting fees required to support growth initiatives. Year-to-date, corporate expenses were up 5,4 million CAD, reflecting an increase to the directors´ compensation program and higher external consulting fees.

Based on Viterra´s projections, fiscal 2009 industry receipts are estimated to be between 34 and 35 million tonnes, the highest level experienced in the past ten years and well above the 31 to 33 million tonne average, The Company anticipates strong demand and deliveries for the remainder of the fiscal year, Farm incomes were up approximately 63 percent from 2007 and grain prices have been relatively strong when compared to historical averages. Both factors have been positive for the Agro-products segment and are reflected in continued strong demand for crop inputs this spring.

About: Viterra Inc. is Canada´s leading agribusiness, with extensive operations and distribution capabilities across Western Canada, and with operations in the United States, Japan, Singapore and Geneva (Switzerland). The Company is diversified into sales and services of crop inputs and equipment, grain handling and marketing, livestock feed and services, agri-food processing and financial products. These operations are complemented by value-added businesses and strategic alliances which allow Viterra to leverage its pivotal position between Prairie farmers and destination customers.