001048 IBP Earnings Fall But Exceed EstimatesOctober 18, 2000Chicago, IL - IBP Inc. said earnings fell in the third quarter due to relatively high prices for live hogs but still beat the analysts' consensus forecast. IBP officials said in a conference call that live hog prices in the quarter were up almost 30% from the same period a year ago. An IBP spokesman said pork prices were the main drag on earnings in the quarter. Lofty costs to buy live hogs are in sharp contrast to market conditions a year ago, when hog prices were coming off all-time lows, making IBP's year-over- year comparisons especially difficult, said Salomon Smith Barney food industry analyst Jaine Mehring. “The third quarter a year ago was just an unusual time in the pork business, and everyone was making profits that were unsustainable,” Mehring said. IBP said earnings in the latest quarter were $83.9 million or 79 cents a diluted share. Analysts on average forecast earnings of 75 cents, according to market research firm First Call/Thomson Financial. Last year, earnings were $96.6 million, or 90 cents a share, before a $13.8 million nonrecurring reduction of income tax expense. Actual third-quarter 1999 net earnings totalled $110.4 million or $1.03 per diluted share. Excluding the item earnings were down 13%. Third-quarter sales grew to $4.2 billion from $3.8 billion in 1999. Prior-year results were restated to reflect the acquisition of Corporate Brand Foods America Inc. IBP earlier this month agreed to be bought out by a fund affiliated with investment banking firm Donaldson Lufkin & Jenrette. In a conference call with analysts, IBP officials declined to provide further details on the buyout, but repeated that the company would still consider other offers. “There is nothing preventing another company or organisation from submitting a higher bid,” said Sheila Hagen, IBP's general counsel. The high live hog prices in the recent quarter crimped profits for both the company's fresh meat operations and its processed pork items even as demand for finished products held strong. “Unusually high hog prices led to unusually high prices for hams and (pork) bellies,” said Chief Operating Officer Richard Bond. He predicted the fourth quarter would see improvement on the pork side. Although hog slaughter levels in 2000 have been running below 1999 levels, recent pig crop reports indicate hog production is expanding again. Increased numbers are expected for the remainder of this year and into 2001, IBP said. Abundant beef supplies, likely to continue into the first part of 2001, helped offset the difficulties in pork, Bond said. Large cattle numbers, coupled with higher-than-average weights due to an ample corn supply, are contributing to another year of record-high beef production, the company said. “Demand for beef remains extremely good,” Bond said. The company said its export sales reached the highest level for any quarter in its history. Third-quarter sales were up 15% from a year ago, while volumes rose 10%. The strongest gains were in Japan and Korea, while sales to Mexico also increased substantially. IBP said it continues to expand its production of case-ready fresh meats in packaged cuts such as steaks, roasts and chops sold under the company's new Thomas E. Wilson consumer brand name. The company also launched a line of convenient cooked meats under the Thomas E. Wilson name. Seven fully cooked beef and pork roasts are being test marketed in Indiana and Michigan. E-mail: sflanagan@sprintmail.com |