010473 Higher Costs for Cattle Pressure IBP Earnings

Dakota Dunes, SD - No. 1 U.S. beef producer IBP Inc. said fiscal first- quarter earnings plunged 66% before one-time items, partly due to a higher cost for cattle and hogs and tighter supplies from a year ago.

IBP, embroiled in a dispute over Tyson Foods Inc.'s decision to withdraw last month from a planned acquisition with it, said looking ahead earnings should be supported partly by improved market ready supplies of cattle forecast for the next several months and increased hog numbers the remainder of the year.

The company said that before one-time items, earnings for the first three months of 2001 were $20 million, or 19 cents a share, compared with $60 million, or 54 cents, a year ago.

First-quarter included a $12 million pretax credit to the company's stock options expense due to decreased stock value during the quarter. Unusual items in the year ago quarter included pretax costs related to the CBFA merger.

Analysts estimated IBP earnings in a range from 12 cents to 35 cents a share with a mean of 17 cents, according to market research firm Thomson Financial/First Call.

IBP sued Tyson in March to try to force the poultry giant to honor a $3.2 billion merger agreement that it backed out of earlier last month. A trial date of May 14 has been set in Delaware Chancery Court. IBP said it did not hold a conference call on its earnings due to pending litigation.

IBP's net sales for the quarter rose to $4.1 billion from $4 billion in 2000.

“The industry experienced reduced cattle numbers and weights during the quarter partly because of the extreme winter weather,” IBP Chairman and Chief Executive Robert Peterson said in a statement.

Live cattle prices were 14% higher in the first quarter from a year ago and hog prices up 6%, IBP said.

Total export sales were down 5% from a year ago and export volumes decreased 2% primarily on market changes in Japan and Korea, where IBP had a banner year in 2000, the company said.

Japan and Korea sales were dampened by a surplus of beef and pork in storage, coupled with food safety concerns triggered by the European outbreak of foot-and-mouth disease and worries over mad cow disease in Europe, IBP said.

While IBP's overall beef exports were down for the quarter, export sales for pork increased 24% from a year ago.

IBP, which released fourth-quarter results in March, had said that it was comfortable with expectations of 2001 earnings in the range of $1.80 to $2.20 a share. The consensus analyst estimate is $1.44, according to First Call.

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