Viterra expects EBITDA to increase C$40M-C$50M/year as new grain marketing freedom in Canada will add to volumes at primary grain elevators, port terminals; company expects to realize modest gains in Q4 2012, more significant impacts in 2013
January 11, 2012
– Viterra Inc. (TSX:VT) (ASX:VTA) ("Viterra") today provided guidance on the projected financial benefits to the Company as a result of the new regulatory environment for the marketing of grain in Canada. With the ability to purchase all grades of wheat, barley and durum directly from growers, the Company expects to increase its earnings by attracting additional volumes and optimizing its operational efficiencies. Viterra anticipates the additional volumes at primary grain elevators and port terminals will generate higher revenue from the fixed cost facilities and earn additional merchandising margins. Viterra expects to capture supply chain efficiencies as it executes with a higher degree of precision given direct relationships with the railroads and an unmatched asset network.
Viterra expects to begin realizing modest benefits in the fourth quarter of 2012, with more significant impacts in 2013. In fiscal 2014 and beyond, the Company anticipates its annual earnings before interest, taxes, depreciation and amortization (1) ("EBITDA") to increase by $40 million to $50 million per annum. This guidance is based on the assumption of an increase in consolidated global pipeline margin of $2.00 to $2.50, which includes a 1.0% to 2.5% market share increase.
Viterra is a market leader in Canada with assets, people and a global marketing network in place to efficiently source and market grains and oilseeds around the globe. As a result, the Company does not expect to incur any additional growth capital expenditures to achieve this earnings benefit. Additional grain purchases will require $150 million to $200 million of incremental working capital, which will be provided by operating cash flows and existing credit facilities.
To date, Viterra has been limited to marketing oilseeds, pulses, oats and other grains, while the Canadian Wheat Board held a legislated monopoly in Western Canada over the purchase and marketing of wheat, barley and durum for export and human consumption. Following the passage of the Marketing Freedom for Grain Farmers Act ("the Act"), growers now have the freedom to sell their wheat, durum and barley to buyers of their choice for delivery on or after August 1, 2012. Despite a legal challenge from opponents of the legislation, Viterra remains confident that there will not be any delays to the implementation of the Act. Leveraging its market expertise and relationships with growers, Viterra was the first company to offer bids to buy these grains directly from growers.
"This is an exciting era for both Canadian grain producers and for Viterra," said Mayo Schmidt, President and CEO of Viterra. "Viterra has built an impressive global footprint with irreplaceable assets in Canada and South Australia, two of the world's most important export markets, and an international marketing network spanning the globe. This allows Viterra to be a leading exporter of key ingredients and highly competitive on a global basis. With the new marketing freedom in Canada, Viterra's international network will benefit growers as it provides them access to additional global markets."