Egg and potato business spurs gain at Michael Foods
by Eric Schroeder
MINNETONKA, MINN. — Gains in the company’s egg and potato business helped offset softness in cheese and dairy, leading to a 52% increase in first-quarter earnings at Michael Foods, Inc. Net income in the first quarter ended March 30 was $14,243,000, up from $9,352,000 in the same period a year ago.
Net sales in the first quarter of fiscal 2013 increased 9% to $484,271,000 from $444,826,000.
Adjusted EBITDA in the company’s Egg Products segment rose to $52,262,000, up 9% from $48,113,000 in the same period a year ago. Net sales increased 11% to $345,321,000 from $310,615,000.
Adjusted EBITDA also improved in the company’s Refrigerated Potato Products segment, climbing 18% to $8,144,000 from $6,920,000. Sales increased 14% to $41,846,000 from $36,820,000.
In the company’s Cheese and Other Dairy-Case Products segment, adjusted EBITDA fell 8% to $8,957,000 from $9,729,000. Sales were virtually flat at $97,104,000, which compared with $97,391,000 a year ago.
“On the egg side, very good pricing mechanics showed up in Q1, which is what we have come to expect, and they continue to operate well for us,” Jim Dwyer, chairman and chief executive officer, said in a May 13 conference call with analysts. “Overall, our mix was quite good, and we had really good volume for food ingredient and retail. We saw some heavier promotion spending in that flat market in Q1, and we expect to see that pricing pressure continue into Q2. We are working hard to stay sharp in our costs and our pricing to make sure that we continue to grow the way we want to.
“Our cheese and dairy we continue to see some very aggressive promotion activity. In an environment of generally higher cheese costs we are selectively defending both our products and our customer positions, balancing revenue and return as we make those investments.
“On the potato side we saw some new business and very effective merchandising in Q1, and we had the same expectations in Q2. At our farms and in the plants we are performing quite well, which is really a testament to the 3,200 plus people we have out there and the leadership across all of those cost functions.”
Asked indirectly what impact a potential move by McDonald’s into the all-day breakfast category might mean for Michael Foods, Mr. Dwyer responded, “We are a big fan of breakfast.”
“I can tell you that our experience with accounts that give their customers the opportunity to serve breakfast all day, that’s good for everybody who plays in the breakfast space,” he said. “We also think, honestly, that eggs and potatoes really do play very well all day. We work with customers on ideas all the time about all sorts of different things, so I’m not really going to comment any further than that.”