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Ridley Hit by Falling Demand for Feed

03 November 2009

GLOBAL - Reductions in herd and flock sizes will eventually restore producer profitability North American feed company Ridley says in its financial report for the first quarter of the 2010 financial year.

For the first three months of fiscal 2010, Ridley Inc earned US$1.1 million after income taxes (eight cents per share) compared to $2.9 million (21 cents per share) last year. Earnings before interest, taxes and amortization (EBITA (i)) for the first quarter of fiscal 2010 were $4.4 million compared to $7.0 million last year.

Steve VanRoekel, President and CEO of Ridley Inc., commented: "These results reflect, for the third consecutive quarter, reduced market demand for animal feed products resulting from poor economic conditions for many livestock and poultry segments across Canada and the United States.

"While the current downturn has been severe, we recognise that meat, milk and egg production moves in cycles of profit and loss. We expect that ongoing herd and flock size reductions will eventually restore producer profitability and strengthen demand for animal feed products."

The external drivers of Ridley's commercial feed business are strongly influenced by the economic dynamics of the North American livestock and poultry production industry. Ridley recorded exceptional results last year as gross profit margins benefited from favourable ingredient positions in generally rising and volatile commodity markets. This year, raw material costs have eased, feed prices have followed those costs downward and there are fewer gains to be realised in ingredient positions. Lower gross profits this year were partly mitigated by significant overhead cost reductions that were initiated in the last half of the prior year, which contributed to operating expenses that were lower this year by $2.8 million compared to last year.

Volumes were lower in each of Ridley's divisions with the most significant effect concentrated in the traditional feed businesses of Ridley Feed Operations (RFO) in Canada and the United States. Earnings in the more specialized divisions of Ridley Nutrition Solutions (RNS) and Ridley Feed Ingredients (RFI) were down due to lower volumes and less favourable ingredient positions.

In the first quarter of this year, Ridley initiated two important new business development projects. Construction work began this summer on a major expansion of manufacturing and warehouse space at RFI's vitamin-mineral premix facility in Mendota, Illinois. Ridley also acquired the manufacturing equipment and product brands of Golden Lyk LLC, a manufacturer of innovative forms of livestock feed blocks that will expand the RNS product offering to existing customers in the upper Midwestern states.

Further Reading

- You can view the full report by clicking here.

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