Land O'Lakes Sales Down 14% in 2009

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.

25 Feb 2010 --- 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.

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.”

Among the 2009 results he highlighted were:
• A record-high $209 million in net earnings;
• A record-high $108 million in cash returned to members;
• Improved balance sheet strength with reduced total debt and completion of an advantageous debt-refinancing package; and
• Continued brand strength and innovation leadership.

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.

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.”