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Viterra eyeing bigger piece of Asian grain import market

The recent purchase of large grain handler ABB in Australia has expanded Viterra's opportunities to expand its business into southeast Asia, but has also provided some growing pains.

Viterra Inc. is an emerging Canadian-based grain infrastructure company and formally known as the Saskatchewan Wheat Pool.
 
Two of the largest grains producing areas are Canada and Australia. Combined, farmers in these growing regions produce 37% of the world’s exports of wheat, barley, and canola, compared to 34% for the US.
 
Asian imports of these commodities are expected to grow by approximately 4% annually for the next 10 years and of course Viterra wants a chunk of this.
 
The acquisition of Australian ABB has provided challenges to management that will take time to resolve.
 
Viterra is in the process of rebranding ABB assets and realigning their business structure. As the restructuring of the Australian business takes hold during the next 24 months, management can begin to turn its attention to additional acquisitions.
 
Grain handling expertise
Viterra focuses on providing the infrastructure to facilitate the marketing and transportation of grains, specifically wheat, barley, oats, and canola, from Canada and Australia to overseas markets, such as Africa and the Middle East, South America, and Asia.
 
As an integrated middle-man in the movement of basic agricultural commodities, VT’s market will continue to grow and offers management the prospect of greater capitalization of their assets.
 
VT can be broken down into three segments: Grain handling and marketing, Agri-products, and Agri-food and Feed processing.
 
Grain handling represents about 46% of EBITA, with agri-products around 25%, and food and feed processing around 29%.
 
Largest in Canada
Viterra is the largest Canadian grain handler with a 45% market share, operating six large port facilities, including Prince Rupert (west) and Thunder Bay (east), along with 85 grain elevators.
 
Coordinating large rail shipments from its grain elevators to its export terminal services provides VT with a strong market advantage that translates into higher inventory turns and better cash management.
 
It is anticipated the newly acquired Australian assets will benefit from a similar approach.
 
Agri-products include a large chain of farm retail stores, both in Canada and newly acquired in Australia.
 
Australian assests
It is expected that the Aussie retail business will generate improved margins from a restructuring along the lines of their Canadian brethren. Viterra also owns fertilizer plants in Canada and Australia, and produces proprietary seeds.
 
Agri-processing comprises of malt, oats, canola, and animal feed processing. The combination of Joe White (Australia) and Prairie Malt (Canada) creates one of the world’s largest malt suppliers to the beer industry.
 
VT is also a major oats and canola processor globally. Feed production in Canada, the US, and New Zealand offers a stable business, with global demand for feed grain growing by around 2% to 3% a year.

Dick Ziggers

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