March 1, 2012

 

 

The 2011 financial results including its record sales and the company's second highest net earnings have been released by Land O'Lakes.

 

According to a February 23 release, Land O'Lakes 2011 net sales totalled US$12.8 billion, up 15% from 2010's US$11.1 billion. These results include record revenues in the company Dairy Foods, Feed and Crop Inputs businesses.

 

Net earnings for 2011 totalled US$182 million, up 2% from 2010's US$178 million. Earnings for 2011 were impacted by US$14.7 million in unrealised hedging losses, while 2010's earnings include the impact of US$6.2 million in unrealised hedging gains.

 

Chris Policinski, Land O'Lakes President and Chief Executive Officer, said, "Our 2011 results reflect strong performance in a challenging economy and volatile market place.

 

Total balance sheet debt, including capital leases, was US$915 million at year-end, versus US$618 million as of December 31, 2010. This increase was mainly due to higher working capital use, stemming from increased product prices and business growth. The company took advantage of historically low market interest rates to lock in attractive long-term debt during the year, including a US$150 million, 10-year term loan at the parent level and a US$60 million, five-year term loan at its Moark subsidiary.

 

The company's Long-Term Debt-to-Capital ratio was 41.3% as of December 31, 2011, versus 32.5% at the end of the prior year. During 2011, the company received financial rating upgrades from both Standard and Poor's and Moody's Investors Services, achieving Investment Grade status with both agencies.

 

Land O'Lakes Dairy Foods business reported record sales of US$4.3 billion, up 17% from 2010. Dairy Foods achieved pre tax earnings of US$28.1 million for the year, compared to US$50.3 million in pre tax earnings for 2010. These results reflect the impact of an uncertain general economy and late-year volatility in dairy markets. Dairy Foods 2011 results include a US$6.5 million unrealised hedging loss, while 2010 results included a US$4.2 million unrealised hedging gain.

 

While Dairy Foods volumes were mixed, with overall retail volume down 6%, margins were strong nearly across-the-board. Notably, the company held its volume in its branded butter and deli cheese product lines, and new products performed well.

 

The company's Dairy Foods Business-to-Business operations outperformed the industry, with Foodservice volumes up 8% and Ingredients volumes up 1%. During the year, Land O'Lakes repositioned its global Dairy Powders business, shifting from selling dairy-based powders (through a marketing agency) as an unbranded commodity to the marketing of value-added, branded powder to key commercial customers.

 

The company's Crop Inputs business Winfield Solutions reported a record US$4.0 billion in 2011 sales, up 10% from the previous year. Pre tax earnings in Crop Inputs were US$140.4 million, down from 2010's US$144.8 million in pre tax earnings. Results for Crop Inputs in 2011 include a US$0.6 million unrealised hedging loss, versus a US$1.9 million unrealised hedging loss at year-end 2010.

 

Volumes were strong in most segments, with alfalfa seed up 25%, corn up 8% and crop protection products up 22%. The company's Feed business achieved a record US$3.9 billion in net sales, up 19% from 2010. Feed generated US$18.7 million in pre tax earnings, versus US$22.1 million in 2010. Feed results for 2011 include a US$7.1 million unrealised hedging loss at year-end, while 2010 results included a US$2.6 million unrealised hedging gain.

 

Stronger livestock markets and targeted marketing contributed to a 13% increase in Livestock feed volume, with volume up in all key species. Lifestyle feed volume was down 5%, reflecting a decline in animals being fed.

 

The company's Layers/Eggs business, Moark, achieved US$599 million in sales, up 17% from 2010. The eggs business reported a US$3.3 million pre tax loss for the year, compared to a US$27.2 million pre tax loss for 2010 (when results included a one-time charge for a legal settlement). Unrealised hedging impacts in this business were not significant. Volumes were strong in the Eggs business, up 6% overall and up 17% in higher-value branded and specialty eggs. Those increases were offset by increased input costs, particularly feed.

 

Land O'Lakes is a national, farmer-owned food and agricultural cooperative with annual sales of nearly US$13 billion.