Viterra Reports

REGINA - Jan 18/08 - SNS -- Viterra reported net earnings of $111.2 million on sales of $3,535 million for the fiscal year ending October 31, compared to a net of $3.1 million on sales of $1,643 million the previous fiscal year. The jump in sales reflects the combined results for the former Saskatchewan Wheat Pool and Agricore United.

Earnings from continuing operations before interest, taxes, amortization, integration costs, gains or losses on asset disposals and pension settlement provisions ("EBITDA") for the 12 months ended October 31, 2007 improved by more than $177.7 million to $258.0 million compared to $80.4 million in the same period of 2006. Increases in EBITDA were a result of improved grain margins, stronger fertilizer sales and margins and incremental EBITDA of $114.5 million contributed from Agricore United since it was acquired in May 2007. Cash flow provided from operations improved by $144.9 million to $203.9 million ($1.47 per share) for the 12 months ended October 31, 2007, compared to $59.1 million ($0.65 per share) reported in the same period of the prior year.

Grain shipments for the 12 months ended October 31, 2007 of 12.5 million metric tons (MT) improved by 4.3 million MT over the same period of the prior year, mainly a result of the additional shipments through Agricore United facilities in 2007. Higher shipments, combined with improved grain margins of $24.79 per tonne in the 12 months ended October 31, 2007 (2006 - $20.05 per tonne), contributed to an overall $94.3 million increase in EBITDA in the Grain Handling and Marketing segment during this period. Segment EBITDA for the 12 months ended October 31, 2007 was $162.9 million, compared to $68.6 million in the same period of 2006.

Gross margins in 2007 include a $4.1 million ($0.33 per MT) gain accrued on mark-to-market revaluations of Agricore United grain contracts. Despite the competitive environment which influences prices offered at the farm gate, the Company achieved higher margins in 2007 as a result of better inventory management, which contributed to positive country and terminal inventory audit gains. In addition, appreciation in the Company's open market grains (a factor of improved market conditions and crop quality), as well as improved terminal efficiencies, higher blending gains, logistic efficiencies, merchant margin improvements and additional profits on screening byproducts also contributed to higher margins in 2007.

Discussing the outlook for western Canadian agriculture in 2007-08, Viterra made the following comments:

Western Canadian grain production of the six major grains in 2007 was estimated by Statistics Canada to be about 45.3 million MT, compared to last year's production of 47.1 million MT and the 10-year average of 47.7 million MT. The grain industry typically ships about 64% of the grain produced over the following 12-month period, and as such, the industry would expect to ship about 29 million MT of grain in 2008 (excluding drawdowns of carry-out stocks), compared to total shipments of about 33 million MT in the most recent 12 months (which included a drawdown of carry-out stocks of about 5 million MT). Although management expects CWB exports to decline slightly, canola exports are expected to increase, mitigating the impact on the Company's port terminal operations. With Viterra's leading position in Canada in the merchandising of canola, the Company is well positioned to benefit from a stronger canola program.

Strong commodity prices bode well for the Canadian agriculture industry and prices continue to improve due to tightening world supplies, greater demand for both food and feed grains, and expanding ethanol and biodiesel industries. For the Agri-Products segment, crop input sales are expected to benefit from such higher commodity prices. In particular, higher commodity prices have significantly contributed to higher demand for fertilizer and continued supply pressures could increase prices to record highs. Early indicators suggest that producers are planning to increase usage rates of fertilizer in 2008 to replenish depleted soil nutrient levels and maintain yield potential. To date, natural gas prices, the primary input in the production of nitrogen fertilizer, remain comparable to the prior year, which also bodes well for the Company's investment in Western Cooperative Fertilizers Limited ("Westco"). Recent increases in fertilizer prices suggest that the Company can expect strong fertilizer sales and margins in 2008; however, it remains uncertain whether these price increases will be sustained and contribute to inventory appreciation again in the spring. In addition, factors such as weather, pressures on supply and delivery and producers' crop decisions will affect the ultimate timing and level of sales.

Oat quality for the most recent crop year was variable, but generally average to very good for Can-Oat's milling operations right across the prairies. While commodity prices for oats are not expected to drive an increase in seeded oat acreage in the coming year, management believes there is a strong carry-out crop this year that will mitigate a decline from the high seeded acre production of 5 million MT in 2007. Can-Oat continues to pursue opportunities that will allow it to leverage its processing expertise and relationships with key food manufacturers in the non-oat processing sector.

In the livestock sector, higher feed ingredient costs are driving higher feed prices, which at a time when producers are feeling the impact of a stronger Canadian dollar and a downturn in the hog cycle, could negatively affect the Canadian Livestock Feed and Services operations in 2008. Poultry and dairy producers are expected to be less affected as their returns are insulated by supply management programs. However, lower returns for hog farmers, particularly if there is a retraction in the hog industry, could reduce feed volume opportunities and heighten competitive pressures. Viterra's diversification among different species should mitigate some of this risk, as will the added benefit of U.S. operational diversification.

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