Milling & Baking News - April 20, 2004 - 12

F I N A N C I A L

R E S U L T S

AIPC faces deteriorating pasta
market, profit/sales picture
Continued from Page 1
the company's first quarter ended March
20. The 3% to 4% drop was about double
the 2% decline the company had been
expecting before January.
According to AIPC, consumption
declines of more than 10% were recorded by several major U.S. retailers,
"reflecting consumer
diet changes, exacerbated by labor strikes
and changes in their
category and margin
strategies."
AIPC emphasized
that the highly volatile
pasta market environment makes it much
more difficult for it
to "predict volume
and market share
developments with a
reasonable amount of
certainty."
The forecast for a
slight decline in fiscal
2004 earnings from the
year before contrasts
with a January forecast
that the company would achieve 17%
earnings growth for the year.
Roughly half of this 17% growth
had been expected to come from its
new reduced-carbohydrate products.
The company remained upbeat about
its position in and prospects for the
reduced-carbohydrate pasta market.
Describing the initiative as a "complex
and far-reaching project," AIPC detailed
its progress to date.
Consumer research has yielded
positive feedback, and the company will
benefit from its exclusive rights within
the pasta industry to patented ingredi-

ents, AIPC said. "The ingredients are
much more costly than our standard raw
materials, currently in high demand and
more challenging to work with," AIPC
said. These characteristic have resulted
in significant up front development
costs, the company said.
In its efforts to roll out the new prod-

ucts across all business units, distribution to retail has enjoyed the greatest early success. As of March 31, the products
were on the shelves of one in three U.S.
supermarkets and have been accepted
by more than 95% of U.S. grocery outlets, the company said. Revenues from
reduced-carbohydrate pasta totaled
about $8 million in the second quarter,
versus $2.7 million in the first quarter.
While AIPC has completed its customized product development of lowcarbohydrate pasta for industrial and
private label customers, the rollout has
been slower than expected. "Our busi-

Cargill operating profit climbs 7% on
strength of broad range of businesses
MINNEAPOLIS - Operating profit of Cargill, Inc. in the third quarter ended Feb. 29
increased to $259 million, up 7% from $243
million in the same period a year ago.
Last year's third-quarter operating results were favorably affected by income
from litigation settlements. In addition,
Cargill earned $12 million from discontinued operations, which brought quarterly
earnings to $271 million, an 11% increase
from $244 million a year ago.
"In a quarter filled with challenging developments in the grain and oilseeds, meat
and poultry, ocean freight and energy mar12 / Milling & Baking News, April 20, 2004

kets, Cargill delivered a solid performance,"
said Warren Staley, chairman and chief
executive officer. "Our team did a terrific
job managing the changing supply-and-demand equation in the commodity markets,
particularly the increased volatility and
tighter supplies that accompanied the demand-led rise in raw material costs."
Cargill said that a broad range of businesses contributed to positive results in
the third quarter, including some European
and Latin American-based food ingredient
units, the company's global grain, oilseeds,
cotton and sugar network, pork processing

ness plan for 2004 anticipated revenue
and profit contributions from these two
segments in the second quarter, which
did not occur," AIPC said. The company
has commitments from private label and
ingredient customers and is predicting
shipments will begin before the end of
the fiscal year.
For the second quarter ended April 2,
AIPC said it expects to announce earnings of $7.5 million to $7.8 million. These
projected results include a provision for
new product development
and start-up costs of $2.6
million. Another $1 million
in such costs will be charged
against earnings in the third
quarter. Included in the
costs are formulation development and product testing
of the company's portfolio
of low- and reduced-carbohydrate products. The
company also cited "incremental manufacturing and
logistics costs, including
unplanned down time on
dedicated lines, efficiency
losses and excess product
waste." AIPC said it also
has had to face short-term
raw material availability
and sourcing issues.
These past difficulties notwithstanding, the company said it is "encouraged
that new product operational performance is approaching our budgeted cost
estimates."
Despite the weaker profits, AIPC is
not cutting back on its efforts to build its
brands. "Given the current industry and
competitive dynamics, and our strategic
commitment to increase market share, we
are maintaining, and in some instances increasing, promotional and marketing support for our brands," the company said.
AIPC sales in the second quarter were
estimated at $113 million, up about 2%

and cattle feeding activities in the meat sector, deicing salt products and several energy,
risk management and financial businesses.
During the third quarter, Cargill initiated or
completed a number of growth initiatives, including the Jan. 27 agreement with IMC Global to combine Cargill Crop Nutrition and IMC
Global into a new, publicly traded company
offering a complete line of phosphate, potash
and nitrogen fertilizers and feed phosphates
to customers worldwide.
In February, Cargill acquired nearly all
of the assets of Agway Feed & Nutrition,
a company that serves dairy producers in
New York and Pennsylvania, and supplies
branded feed products to retailers in the
northeastern United States. MBN
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - April 20, 2004

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