ARDEN HILLS, Minn. — Land O’Lakes, Inc., today released its 2009 financial
results, which included record-high net earnings, achieved in what company
officials termed a difficult and volatile economic environment and marketplace.
Highlights of the release included:
- Record net earnings of $209 million;
- Record-high cash returned to members of $108 million; and
- Net sales of $10 billion, the company’s second-highest revenue total.
Strong Results in a Challenging Economy
Commenting on Land O’Lakes’ strong 2009 performance, Chris Policinski, Land
O’Lakes President and Chief Executive Officer, said: “Despite a weak economy,
Land O’Lakes delivered solid financial results including record-high net
earnings because we met the needs of a changing marketplace. The strength of
our brands, aggressive and targeted marketing, and adjusting our product mix to
meet customer and consumer preferences all contributed to our outstanding
results.”
Policinski cited several performance highlights, including:
- A volume increase in the company’s flagship branded butter business of 2
percent, in a highly price-conscious market; - An 11 percent increase in Foodservice volume, while the segment as a whole
was down year-over-year; - A 4 percent volume increase in the company’s industry-leading animal milk
replacer product line, despite financial stress across the dairy industry; - An increase in Lifestyle feed volume of 2 percent, led by strong gains and
record-high volumes in the companion animal segment; and - A 5 percent increase in overall shell egg volume, with a 7 percent volume
increase in the premium-priced branded / specialty egg segment.
Policinski also pointed to the company’s leadership in innovation, with Land
O’Lakes launching a wide range of new branded products across its businesses
during the year. “What’s particularly good to see is that 9 percent of our 2009
Dairy Foods Value Added volume was generated by the new products category
which are products introduced over the past three years.”
Land O’Lakes also focused on balance sheet strength and cost control in 2009.
“We maintained or improved key financial measures, and total debt was down by
$250 million, as compared with year-end 2008,” Policinski said. “We also
achieved nearly $70 million in cost savings, and we refinanced our publicly held
debt at attractive interest rates.”
SALES AND EARNINGS
Land O’Lakes 2009 sales totaled $10.4 billion, down 14 percent from 2008’s
record $12.0 billion. The 2009 decline was largely due to lower commodity prices
nearly across all businesses, and the impact of the recessionary economy on
consumer and customer purchasing decisions.
Record-high net earnings of $209 million for 2009 were up 31 percent from 2008.
Earnings for 2009 benefited from $37 million of unrealized hedging gains (as of
year-end 2009) versus $52 million in unrealized edging losses (as of year-end
2008). Company officials noted that unrealized hedging is more an indicator of
market conditions at a given time than of performance. If the impact of hedging
were factored out, 2009’s net earnings would be second only to 2008.
BALANCE SHEET
Total balance sheet debt, including capital leases, was $694 million at year-end
(versus $944 million as of Dec. 31, 2008). The company improved its Long-Term
Debt-to-Capital ratio, which was 33.7 percent as of Dec. 31, 2009, compared to
34.8 percent as of Dec. 31, 2008.
As previously announced, the company successfully completed a refinancing during
the fourth quarter of 2009, which included the redemption of its publicly-held
bonds. As a result of that restructuring, the company is no longer required to
file periodic reports with the Securities and Exchange Commission, and has
discontinued its quarterly public conference calls.
BUSINESS UNITS
Dairy Foods
Land O’Lakes Dairy Foods business reported pretax earnings of $61.0 million for
the year, compared to $16.3 million in pretax earnings for 2008. Dairy Foods
2009 results include a $13.0 million unrealized hedging gain position as of Dec.
31, 2009, while 2008’s results included a $13.5 million unrealized hedging loss.
Dairy Foods sales for the year totaled $3.2 billion, compared to $4.1 billion in
2008, primarily the result of lower commodity prices and a price-conscious
marketplace.
Volumes were flat with 2008, but mixed by category. Notably, volume was up for
the company’s flagship branded butter, a reflection of the strength of the
company’s LAND O LAKES brand. While volumes were down slightly in the Consumer
Cheese category, Dairy Solutions (Foodservice and Ingredients Solutions) volumes
were up, with increases in the School and Government segments offsetting a
decline in Full Service Restaurant sales.
Feed
The company’s Feed business reported $29.8 million in 2009 pretax earnings, up
from $500,000 in 2008. Feed results for 2009 include an $18.4 million unrealized
hedging gain, compared to a $29.0 million unrealized hedging loss as of Dec. 31,
2008.
Feed sales for 2009 were $3.4 billion, down from $3.9 billion in 2008. Volumes
were mixed, with financial stress and lower commodity prices in the dairy and
beef markets contributing to reduced volumes and a lower-priced product mix in
the Livestock segment. Lifestyle feed and Milk Replacer volumes were up.
Layers/Eggs
The company’s Layers/Eggs business, MoArk LLC, reported a $2.8 million pretax
loss for 2009, compared to $29.9 million in pretax earnings for 2008. Earnings
and dollar sales were both down in 2009, driven by a 20 percent decline in
average commodity egg prices year-over-year. Results for 2009 include $520,000
in unrealized hedging gains (as of Dec. 31), while 2008 results included an
$847,000 unrealized hedging loss.
The company reported 2009 sales of $523 million in this business, compared to
$606 million in 2008 sales. Volume, however, was up notably in commodity and
specialty/branded eggs.
Crop Inputs (Seed, Crop Protection Products, Retail Agronomy Solutions)
In 2009, the company’s Crop Inputs business reported $136.8 million in pretax
earnings, versus $161.0 million in comparable pretax earnings for 2008. Results
for Crop Inputs in 2009 include $11.1 million in unrealized hedging gains, while
2008 results include unrealized hedging losses of $14.5 million.
Crop Inputs sales for 2009 were $3.3 billion, versus comparable sales of $3.5
billion in 2008.
Volumes in both Seed and Crop Protection Products were down due to a combination
of reduced acreage planted in some segments and higher than expected customer
carryover from a strong 2008.
Crop Inputs results for 2009 included a $28.2 million loss in Agronomy,
primarily related to the company’s ownership position in Agriliance LLC, a
retail agronomy joint venture. The company has been working to reposition these
assets as it extends its strategic focus on the wholesale seed and crop
protection products business. This repositioning effort is now largely complete,
and company officials indicated they expect to reposition the remaining assets
in the first half of 2010.
Land O’Lakes, Inc. (www.landolakesinc.com) is a national, farmer-owned food and
agricultural cooperative with annual sales of $10 billion. Land O’Lakes does
business in all 50 states and more than 60 countries. It is a leading marketer
of a full line of dairy-based consumer, foodservice and food ingredient products
across the United States; serves its international customers with a variety of
food and animal feed ingredients; and provides farmers and ranchers with an
extensive line of agricultural supplies (feed, seed, and crop protection
products) and services. Land O’Lakes also provides agricultural assistance and
technical training in more than 25 developing nations.
Source:
Land O’Lakes, Inc.
