Dakota City, NE - IBP Inc. said that fourth quarter earnings jumped to a record $92 million, more than four times the $22 million posted a year earlier, as tumbling hog prices bolstered profit margins.
IBP earned 98 cents a diluted share in the fourth quarter ended December 26, up sharply from last year's fourth-quarter profit of 23 cents a share. Net sales fell to $3.1 billion from $3.3 billion a year ago.
The earnings, which IBP previewed in December, topped Wall Street expectations for 94 cents a share, according to research firm First Call, which tracks analysts' estimates.
“Restructuring of pork production capacity, completion of a plant start-up in Indiana and the larger-than-expected increase in hog supplies have made the difference,” Robert Peterson, chairman and chief executive officer, said in a statement.
“These factors have enabled our pork plants to run at higher utilization and allowed the company to market increased volumes of finished product,” he added. “This has resulted in increased efficiency and profitability. We look for our pork operations' success to continue, since hog supplies are expected to remain strong well into 1999.”
Huge hog supplies in December sent prices tumbling to the lowest levels since World War II, driving some producers out of business. Hog prices have since recovered somewhat, but the low prices were a boon to IBP and other meat processors who were able to buy the hogs at low prices and sell pork products into a strong economy at a healthy profit.
However, the increased supplies of pork and other meats pressured beef prices and profit margins, IBP said. The beef operations were also hurt by economic turmoil in Asia, a key export market for IBP's meat products.
Shares of IBP were down 12.5 cents at $24.00 in morning New York Stock Exchange trading.
Meat Industry Insights News Service
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