Imperial Sugar, which manages the risks to raw sugar price changes through its hedging program, said declines in the raw sugar market since Dec. 31, 2009, levels led to $24.8 million of losses on derivative contracts intended to hedge future raw sugar purchases. The losses did not qualify for hedge accounting treatment, which increased the company’s cost of sales to $249,710,000 in the second quarter, up from $130,124,000 in the same period a year ago, Imperial said.
Sales for the quarter were $208,863,000, up 68% from $124,302,000 during the same quarter of the previous year. The gain primarily reflected ramped-up production volumes and higher domestic prices. Domestic sugar volumes were up 43% year over year, while prices rose 15%. Imperial added that although production improved during the quarter, challenges starting up certain specialty product lines delayed the resumption of distribution to certain customers, including several retailers who require a full line offering of products.
“Progress during the quarter continued as we worked diligently to restore Port Wentworth to normalized operating levels but at a slower pace than planned,” said John Sheptor, president and chief executive officer. “The refinery’s total production increased to 80% of normal periods from 60% in the first fiscal quarter of this year, a marked improvement. However, daily production rates lagged normal capacities, necessitating additional production days, which increased costs, while the lower total production constrained sales. We are encouraged by the progress to date and expect daily production rates and volumes to continue an upward trend, which should improve results going forward.”
For the six months ended March 31, Imperial Sugar had net income of $144,852,000, equal to $12.28 per share on the common stock, up from a loss of $12,514,000 in the same period a year earlier. Net sales were $382,642,000, up 64% from $232,950,000.