Despite growing losses, higher profits in refrigerated foods have been helping Farmland Industries survive in an adverse economic climate.

Thursday, April 11, 2002

Despite growing losses, higher profits in refrigerated foods have been helping Farmland Industries survive in an adverse economic climate.

The Kansas City-based agri-business giant announced Wednesday its financial results for the first six months of the fiscal year starting September 2001.

A lower demand for nitrogen fertilizers and other adverse market conditions resulted in a $32.3 million loss in continuing operations, compared to $20.3 million in the same period last year.

Farmland President and CEO Bob Honse pointed out in a statement that the plunging sale of the nitrogen fertilizers increased the loss in the crop-production division to $78 million. The company attributes the loss to unexpected drought conditions in the wheat belt coupled with a lower selling price.

Meanwhile, earnings in refrigerated foods – the division that would include a new processing plant in Albert Lea, replacing one that burned July 8, 2001 – doubled compared to the same period the year prior, from $16.9 million to $33.6 million.

The positive growth indicates the company’s restructuring efforts have been paying off.

Farmland has closed down unprofitable plants in Dubuque and Carroll, Iowa, during the past two years, while shifting its production to more value-added processed meats. An annual 200 million pounds of products from a new Albert Lea plant is expected to add more profit to the account.

The company said the restructuring efforts would continue.

A nitrogen fertilizer plant in Lawrence, Kan., was placed on standby operational status earlier this year. The company also reduced the workforce at its Pollock, La., plant, which has been idle since last month. Production has been curtailed at all of the company’s domestic nitrogen fertilizer plants except the new Coffeyville, Kan., facility that enjoys lower production costs.

Honse said, &uot;In the last few years, the fundamentals of the fertilizer industry have shifted dramatically. We are looking at strategies designed to provide greater earnings stability in this segment.&uot;

The sales between September and March were $3.4 billion, down from $4.7 billion in the same period last year. Farmland explained that it is primarily due to the company’s grain sales being transferred to ADM-Farmland Inc., a grain marketing partnership formed last year with Archer Daniels Midland Co.