CHICAGO - International Multifoods Corp still has far to go to complete a turnaround, despite improved profit margins and lower costs, chairman Gary Costley said.
"We've got a lot of work left to do," Costley said in a telephone interview. "When you really look at (our) performance compared to our peer group, we have a very poor performance in these businesses... I'm not going to be satisfied until we get close to the middle of the bell-shaped curve of our peer group."
Since Costley took over as chairman of the Minneapolis-based company in January, 1997, International Multifoods has taken a hard look at its various divisions, which include food processing and vending distribution.
The yardstick that Costley has employed is economic value added (EVA), measuring a company's operating earnings compared with the cost of capital.
"We're the perfect kind of company for instituting EVA because it gives you a single measure on which to evaluate very different businesses," Costley said.
Based on EVA, International Multifoods has decided to exit the trading portion of its food-export business in which it acts as a broker for poultry products shipped to Russia.
"The margins are not sufficiently large on an EVA basis," Costley said.
As the poultry trading operation winds down, the staff has been cut from about 35 people to "about half that many now," he added.
International Multifoods said earlier that it plans to sell its Canadian frozen bakery business, called Gourmet Baker, which makes frozen cakes and pies, by the end of fiscal 1998.
"It's a business that...doesn't make sense for us," Costley said, adding Gourmet Baker is not profitable for International Multifoods because of the overhead it carries.
Within its core businesses, International Multifoods has improved margins and reduced capital needs, Costley said.
Earlier, he said he was comfortable with a range of analysts' estimates for fiscal 1998, ending in February, of $1.25 to $1.28 a share, up from earnings before unusual items a year ago of $0.98 a share.
The company also reported second quarter earnings of $0.25 a share, up from $0.22, with improvements in Foodservice Distribution and North America Foods.
Its Venezuelan food business remains a challenge, however, in part because of that country's transition to a free-market economy.
"I think it is very viable long-term, and a base from which we can grow a South American food business," Costley said.
Press Here for Info on Setting Your Own Web Site
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
Web Site: http://www.spcnetwork.com/mii