May 8, 2009
Land O''Lakes posts US$82.7 million Q1 net earnings
Land O''Lakes, Inc. officials reported a 35 percent increase first-quarter 2009 net earnings by US$82.7 million, from the first quarter of 2008 ($61.3 million). Net sales for the quarter were US$2.9 billion, down from US$3.3 billion for the same quarter one year ago.
Land O''Lakes President and Chief Executive Officer Chris Policinski said the company''s first-quarter results showed strength and diversity of Land O''Lakes core businesses, as well as the strength and stability of the company''s balance sheet.
Policinski however noted that a combination of soft commodity markets and the impact of economic uncertainty on consumer and producer purchasing decisions continue to present challenges in most of the company''s businesses. In response, he said, the company has intensified its focus on cost control, risk management and product mix adjustment. He also indicated brand strength and long-standing customer relationships provide important advantages in dealing with current economic conditions.
For the quarter, the company reported Total EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of US$112.8 million, compared with US$109.3 million for the first quarter of 2008. The EBITDA is on a normalized basis, excluding the effects of unrealized gains and losses from commodity exchange contracts, asset sales, impairments, legal settlements, debt extinguishment costs and other special items. Normalized EBITDA for the quarter was US$115.8 million, compared with US$135.5 million in the first quarter of 2008. Despite the current market turbulence, the company remains cautiously optimistic regarding its performance over the remainder of the year, and increased its guidance for 2009 full-year Normalized EBITDA from US$345 million to US$350 million.
Company officials also indicated the balance sheet remained strong, with an improved Long-term Debt-to-Capital ratio (34.0 percent as of March 31, 2009, versus 35.0 percent on March 31, 2008); total equity of $1.03 billion (versus US$1.07 billion one year ago); and good liquidity (US$169 million in cash-on-hand and unused borrowing authority). Total debt, including short-term debt used mainly for working capital purposes, was US$1.15 billion as of March 31, 2009, compared to US$1.10 billion at March 31, 2008.
Earlier this week, the company announced a US$175-million increase in its revolving credit facility, bringing the total capacity on that facility to US$400 million. The enhanced capacity will be used to provide incremental liquidity for seasonal working capital needs. The terms and conditions of the existing revolver were largely unchanged except for pricing, which was increased to be consistent with current market conditions. The transaction was significantly oversubscribed.
For dairy, the company reported a pretax loss of US$17.9 million for the quarter, compared with a pretax loss of US$5.1 million in the first quarter of 2008. Dollar sales, at US$753 million for the quarter, were down from US$1.05 billion for the first quarter of 2008, due primarily to a combination of lower commodity prices and a consumer shift toward a lower-priced product mix. Company officials noted that Retail Branded Butter volume was down 10 percent, while Private Label Butter was up 12 percent. The company''s Retail Cheese volumes were up 1 percent, Spreads were down 8 percent, Dairy Solutions (Foodservice and Ingredient Solutions) volume was up 11 percent, led by the government and school segments, Industrial Cheese was up 4 percent and whey was up 17 percent.
Land O''Lakes reported US$5.3 million in pretax earnings in Feed for the quarter, down from US$9.4 million for the first quarter of 2008. Feed sales for the quarter totalled US$894 million, down from US$942 million one year ago. Company officials cited market conditions and economic stress, particularly in the livestock and dairy markets, among the factors affecting 2009 performance, as producers reduced volumes and shifted from fully formulated branded feeds to lower value feeds.
From a volume perspective, livestock feed volume was down 14 percent versus one year ago while lifestyle feed was up 2 percent, milk replacers were up 5 percent and feed ingredients were flat versus one year ago.
Slumping markets posted a negative impact on earnings in the company''s Layers/Eggs business (conducted through its MoArk LLC subsidiary), with average shell egg prices for the quarter of US$1.16/dozen, down 28 percent from the previous year (US$1.62/dozen). First-quarter pretax earnings in Layers/Eggs were US$11.2 million, versus US$32.3 million for the first quarter of 2008. Dollar sales for the quarter were US$138 million, compared with US$181 million for the first quarter of 2008. While overall shell egg volume was flat with one year ago, economic conditions were reflected in the product mix, with non-branded shell egg volume up 2 percent and branded and specialty egg volume down 6 percent.