July 30, 2008

 

Land O'Lakes reports a strong second quarter for 2008

Land O'Lakes, Inc. reported net sales of US$3.3 billion and net earnings of $102.8 million for the second quarter.

 

This meant a sales increase of 64 percent over the previous year and a 29.3-percent increase in profit over the second quarter of 2007.

 

Year-to-date net sales were US$6.6 billion and net earnings were US$164.1 million, a 57-percent and a 24.2 percent increase over a year ago respectively. 

 

Land O'Lakes CEO Chris Policinski said the company's solid first-half financial results were achieved despite significant challenges such as market volatility; increased energy, transportation and ingredient costs; and the impact of economic uncertainty on consumer purchasing decisions.

 

The company's strong performance reflects a combination of strong markets, good performance in key product lines and commitment to cost discipline, he said.

 

Although net sales were up a strong 57-percent versus a year ago, company officials noted, however, that as a result of the late 2007 repositioning of its Agronomy business, first-half 2008 sales included US$1.5 billion in crop protection product (CPP) sales that would not have been included in Land O'Lakes financials before the repositioning.

 

If those sales are factored out, year-to-date net sales would be up 21 percent.

 

The company reported an improved Long-Term-Debt to Capital ratio (35.1 percent versus 37.6 percent as of June 30, 2007) and strong liquidity (US$704 million in cash-on-hand and unused borrowing authority).

 

During the second quarter, the company established a US$7.5 million reserve for a potential environmental liability related to past involvement in the Hudson oil refinery in Cushing, Oklahoma.

 

Because the reserve is related to historical costs of a business the company is no longer involved with, this charge has been excluded from normalized EBITDA.

 

In Dairy Foods, Land O'Lakes reported second-quarter sales of US$1.0 billion and US$44.8 million in pretax earnings for the quarter, as compared to second-quarter sales of US$993 million and US$59.1 million in pretax earnings one year ago.

 

Feed
 

The Feed division reported US$926 million in sales and US$20.9 million in pretax earnings for the second quarter, versus US$704 million in sales and US$1.2 million in pretax earnings for the second quarter of 2007.

 

The division reported US$1.87 billion in sales year-to-date, and US$30.0 million in pretax earnings, up from US$1.45 billion in sales and US$5.5 million in pretax earnings through the first two quarters of 2007.

 

Factors driving feed performance included the maintenance of volumes in a challenging market, effective cost control and supply chain management efforts, brand strength and the delivery of a market-responsive product mix. Volumes were stable, year-over-year, with livestock feed volume flat versus the first half of 2007 and feed ingredients up 16 percent.  

 

Layers/Eggs
 

The company participates in the layers/shell eggs industry through Moark LLC, a wholly owned subsidiary. For the second quarter, the company recorded US$139 million in sales and US$11.0 million in pretax earnings in eggs, compared to US$111 million in sales and US$2.7 million in pretax earnings for the same quarter in 2007.

 

Strong markets contributed to the improved earnings in this segment.  Improved prices were partially offset by increased feed and energy costs. Also contributing to first-half performance were improved volume in higher-margin branded and specialty eggs (up 20 percent). Company officials reported some softening of egg prices in the second quarter, which they said was expected.

 

Overall egg volume was down 7 percent for the six months ended June 30, 2008, compared to the same period in the prior year.

 

Land O'Lakes, Inc is a national, farmer-owned food and agricultural cooperative with annual sales of approximately US$11 billion.