991073 IBP Profits Jump Amid Strong Meat DemandOctober 22, 1999Chicago - IBP Inc. said its third quarter profits jumped 44%, easily topping Wall Street forecasts as a strong economy and a trendy meat-laden diet boosted demand for beef and pork. South Dakota-based IBP said it earned $95 million, or $1.01 per diluted share in the third quarter, excluding one-time gains related to lower income tax expenses. After the one-time gains, third-quarter net income reached $109 million, or $1.16 per share. Last year, IBP recorded a third-quarter profit of $66 million, or 70 cents. Quarterly sales rose to $3.65 billion from $3.21 billion a year ago. The earnings far outstripped analysts' expectations of 87 cents per share, according to First Call/Thomson Financial, which tracks earnings forecasts. Ahead of the earnings news, shares of IBP closed up 10/16 at 22-11/16 on the New York Stock Exchange. “Margins in IBP fresh meats improved due to stronger domestic and international demand, as well as our ongoing focus on efficiency,” Robert Peterson, IBP chairman and chief executive officer, said in a statement. “IBP Enterprises, which has become a major player in the prepared foods business, also continues to make excellent gains.” IBP said a strong economy increased consumer spending on red meats, while abundant supplies of cattle and hogs kept grocery store prices down. The company said livestock numbers were expected to remain ample through the early part of 2000, and then decline slightly later in the year. Still, IBP said supply levels would likely remain sufficient. “Beef demand has been surprisingly strong,” said Nomi Ghez, food industry analyst with Goldman Sachs. “We have a very good economy, and we now have this very popular diet that pushes less pasta and rice and more meat.” IBP said its prepared foods business posted double-digit earnings growth in the third quarter and was expected to remain strong in the fourth quarter, when demand for specialty meat products typically increases because of the holiday season. IBP said export sales were beginning to recover from the financial crisis that has gripped parts of Asia, a key export destination for U.S. meat. IBP said export volumes increased 10% in the third quarter, while export sales in terms of dollars rose 19%. Despite the stronger-than-expected earnings, Goldman Sach's Ghez said the reaction in the stock price on Wednesday may be muted because of ongoing concerns about cattle supplies. “Next year, we will be faced with a smaller cattle herd,” she said. “However, I think investors underestimated how good demand can be.”
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