Dekalb Genetics Reports Second-Quarter Earnings
DEKALB, 111. Dekalb Gene
tics Corporation recently reported'
unproved revenues for the second
fiscal quarter, driven by higher
sales of U.S. com and soybean
seed, as well as swine breeding
stock. However, net earnings for
the quarter were lower than the
previous year primarily because of
higher com production costs af
fecting both U.S. and international
seed margins.
For the quarter ended February
28, 1994, net earnings were $5.7
million, or $1.09 per share, com
pared with $7.1 million or $1.38
per share, in the same period last
year. Revenues for the quarter
rose 9 percent to $143.0 million
from $131.4 million. Earnings for
the quarter included an after-lax
benefit of $ 1.0 million, or 20 cents
per share, resulting from the com
pany’s decision to suspend the de
fined benefit portion of its retire
ment program. -
“As we have previously indicat
ed, higher production costs relat
ing to last summer’s crop have
significantly lowered unit margins
for U.S. seed com,” said Bruce P.
Bickner, chairman and chief exe
cutive officer.’These production
costs have also affected interna
tional results, reducing volume
and profitability of U.S.-sourced
seed for export markets.
“Although higher com costs
have posed a challenge, we are
otherwise very pleased with the
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performance of our North Ameri
can seed business,” he said. “We
are seeing excellent demand for
our seed com this season, with se
veral varieties having been sold
out. In addition, the pace of soy
bean sales has been exceptional.”
Bickner noted that North Ameri
can and European seed results are
primarily realized in the second
and third quarters. Thus, the com
bined total of the two quarters is
the best indicator of seed results.
“Our swine business is also
having a good year, with breeding
stock sales running significantly
ahead of lasi year,” Bickner said.
“Demand continues to be very
strong for the product lines we in
troduced last summer.”
For the first six months of the
fiscal year, Dekalb reported net
earnings of $6.6 million, or $1.27
per share, down from $7.9 million,
or $1.53 per share, in the same
period last year. Revenues were
up 3 percent to $183.8 million
from $179.3 million. Year-to-date
earnings included an after-tax
benefit of $1.6 million, or 32 cents
per share, related to the pension
changes. However, Dekalb also
recorded an after-tax charge in the
first quarter of $300,000, or S
cents per share, resulting from the
adoption of the new standard for
accounting for income taxes. Ex
cluding these non-recurring items,
net earnings for the first six
months were down $2.6 million.
or SO cents per share.
“The single largest factor af
fecting six-month results was low
er earnings in Argentina.” Bickner
said./“Argentine earnings declined
46 percent from last year’s record
levels because of lower planted
acreage, lower sunflower prices,
and higher crop costs. However,
these should not be long-term
situations. We have an exception
al product line, and we recently
completed a major plant expan
sion, updating our com drying and
conditioning equipment to help
support our clear leadership posi
tion in the Argentine market.”
Second-quarter revenues for the
seed business rose 8 percent to
$125.2 million, compared with
$116.1 million in the same period
last year. However, segment earn
ings declined 30 percent to $9.6
million from $13.7 million last
year.
“Our U.S. seed com production
volume in 1993 was only 50 per
cent of the previous year, which is
the major contributor to lower unit
margins,” Bickner said. “In addi
tion, our average seed com price is
down because of an unfavorable
seed size mix and early cash re
mittances. These factors combin
ed to cause 14 percent lower U.S.
com unit margins.”
Six-month revenues of $148.4
million were about flat with the
previous year’s $147.9 million.
Segment earnings were $12.4 mil
lion, down 28 percent from $17.2
million in the prior year.
“Clearly. U.S. farmers are plan
ning to plant significantly more
com this spring, as indicated by
the recent USDA planting inten
tions report,” Bickner said. “At
Dekalb, this is being reflected in
increased dealer and sales activity,
larger average order sizes and
higher cash collections. There are
also solid indications that we are
continuing to make further pro
gress with large operators—a key
focus of our business. These fac
tors lead us to be encouraged
about 1994 com sales. We expect,
however, that our seed com sales
recorded in the first half of this fis
cal year will represent a smaller
portion of full-year sales than was
the case in the prior year, when we
had an abnormally Ugh rate of re
turned goods in the last half of the
fiscal year.”
Revenues for Dekalb Swine
Breeders rose 22 percent in the
second quarter to $13.2 million
from $lO.B million. Segment earn
ings increased to $900,000 from
$600,000 in the same period last
year. For the six months, Dekalb
Swine recorded revenues of $26.2
million, up 23 percent from $21.3
million the prior year. Segment
earnings rose to $2.7 million from
$1.3 million.
“Breeding stock sales volume
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Bickner said. “However, our cost
of sales is higher because of high
feed costs and the fact that we are
building inventory at new produc
tion facilities.”
Second-quarter revenues for the
company’s poultry operation were
$4.6 million, about even with last
year. Dekalb Poultry posted a
$500,000 operating loss for the
quarter, compared with a
$200,000 loss in the same period
last year. Year to date, revenues
declined 9 percent to $9.2 million
from $lO.l million. Dekalb Poul
try recorded an operating loss of
$700,000, compared with a loss of
$400,000 in the First six months of
last year.
‘The lower results are due pri
marily to reduced exports,” Bick
ner said. ‘Two situations in parti
cular are taking their toll: an em
bargo against poultry imports into
Venezuela and a lack of U.S. dol
lars in Bulgaria. Unfortunately, it
is difficult to determine when eith
er of these situations might im
prove.”
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