POTASH-INTERVIEW-Viterra sees no rebound in demand this fall

(This story appears as part of a special package highlighting the global potash industry.)

* Says fertilizer margins unlikely to recover quickly

* Demand stable, but prices weak

WINNIPEG, Manitoba, Sept 24 - The fertilizer market looks to remain weak into next year, further damping profits of Viterra Inc <VT.TO>, the leading Canadian farm supply company, its chief executive said.

A drop in fertilizer margins caused profit to fall below expectations for Viterra's third quarter. The company's main business is handling grain, but it also sells fertilizer and owns a minority stake in Canadian Fertilizers Ltd, a maker of nitrogen crop nutrients.

Viterra sold roughly as much fertilizer in the third quarter as in the year-earlier quarter, suggesting stable Canadian demand. But weaker margins weighed against overall earnings, Chief Executive Mayo Schmidt said in an interview.

"I don't think we've seen any signals that necessarily suggest this is going to be corrected any time real quickly," Schmidt said.

Farmers in both Canada and the United States held off on pricey fertilizer purchases a year ago, opting to draw on the soil's existing nutrients, Schmidt said. Eventually, they will have to replace those nutrients, he said.

"I don't think it's necessarily going to happen in the fall. We're stable to slightly better, but there's no big adjustment (imminent)."

Agri-products earnings fell 7 percent to C$938.7 million ($864.4 million) in the third quarter compared with the year-earlier quarter. Viterra posted an overall quarterly net profit of C$120.7 million, down 28 percent.

"It's a normalized, strong earning, but it's not a peak earning for that particular business," Schmidt said. "Are (we) hurt by it? No, we're not, but at the same time we're not able to enjoy the higher margins we enjoyed last year."

Canadian farmers produced a record crop last year even as grain and fertilizer prices rose to record highs, driving Viterra to record net income of C$288.3 million.

Fertilizer margins typically have their greatest impact on Viterra's third-quarter earnings and should have less influence on the fourth quarter, said Robert Winslow, an analyst with Wellington West Capital Markets.

"Fertilizer's probably bottomed out in terms of pricing in Q3, so 'tempered' would be the best way to describe (fertilizer impact in Q4)."