July 29, 2010

Ridley reports loss in preliminary Q4 results

For the three months ended June 30, 2010, Ridley Inc.'s preliminary fourth quarter and fiscal year results indicate a net loss after taxes of US$3.9 million compared to a net loss after taxes of US$8.4 million for the same period last year.

Ridley's results in the fourth quarter this year include a US$2.6 million asset impairment loss and a US$0.9 million restructuring charge resulting from the closure of two redundant feed manufacturing facilities in Manitoba and a reorganisation of Canadian head office functions.

The decision to close two facilities in Manitoba was part of an initiative to reduce operating costs which is expected to improve earnings of Canadian operations over the longer term. The loss in the fourth quarter last year included an US$11.4 million write-down of goodwill in Canadian operations.

For the twelve months of fiscal 2010, Ridley's preliminary results indicate net income after taxes of US$4.7 million compared to a net loss of US$1.3 million last year.

Operating income this year was driven mainly by softer demand for animal feed products reflecting economic difficulties that have persisted for most of the year for livestock and poultry producers and the resulting reduction in animal herd sizes.

Lower gross profits in fiscal 2010 were partly offset by reduced operating expenses as the Company benefited from cost reduction programs initiated last year. Included in the net loss last year was an asset impairment loss of US$1.6 million for closure of a redundant facility in North Carolina and US$2.1 million in restructuring charges.

Ridley's overall volumes in the fourth quarter of fiscal 2010 were lower compared to last year but the effect on gross profit was partly offset by higher unit margins resulting from an improved product mix. The fourth quarter normally represents a seasonal low in volume as demand for commercial feed products is generally reduced by warmer temperatures and more abundant forage.

An exceptional increase in the price of feed ingredients in 2008, combined with recessionary conditions in 2009, forced many producers in Canada and the US to adopt conservative feeding practices and, in many cases, to significantly reduce animal herd and flock numbers.

Meanwhile, the economic environment for livestock and poultry producers in North America has improved significantly since the first half of fiscal 2010, but feed demand will likely recover more slowly as producers remain cautious in their own business plans while rebuilding their balance sheets, according to analysts and reports.