Land O’Lakes Reports Record Sales of $12.8 billion for 2011

February 23, 2012 07:58 AM

Co-op posts also second-highest earnings of $182 million.

Source: Land O’Lakes news release
February 23, 2012 (Arden Hills, Minn.) – Land O’Lakes, Inc., today released its 2011 financial results, which included record sales and the company’s second-highest net earnings.
Highlights of 2011 included:

- Record net sales of $12.8 billion, up from $11.1 billion in 2010.

- Net earnings of $182 million, the second-highest in Land O’Lakes’ history, up from 2010’s $178 million.

- $108 million in cash returns to members, the cooperative’s third-highest annual cash return.

Positive Results in a Challenging Economy
“Our 2011 results reflect strong performance in a challenging economy and volatile marketplace,” Chris Policinski, Land O’Lakes president and Chief Executive Officer, said.  “These results also continue a trend of strong performance. Over the past three years, Land O’Lakes delivered its top three years in net earnings and cash returns to members, as well as two of our top three years in net sales.”
The company said its positive results were driven by the strength of Land O’Lakes’ brands; solid performance by innovative new products; a continued focus on operating efficiency and risk management; and the disciplined pursuit of strategic growth initiatives.
“Agriculture and food production are among the best growth industries of our era,” Policinski added. He cited the increasing demand for food, driven by an expanding global population, which is expected to increase from nearly 7 billion people today to more than 9 billion by 2050.
“Our performance, strong balance sheet and market momentum position Land O’Lakes to capitalize on growth opportunities in the marketplace, and deliver greater value for our members and customers,” he said.
Sales and Earnings
Land O’Lakes 2011 net sales totaled $12.8 billion, up 15% from 2010’s $11.1 billion. These results include record revenues in the company Dairy Foods, Feed and Crop Inputs businesses.
Net earnings for 2011 totaled $182 million, up 2% from 2010’s $178 million. Earnings for 2011 were impacted by $14.7 million in unrealized hedging losses (as of Dec. 31, 2011), while 2010’s earnings include the impact of $6.2 million in unrealized hedging gains. Company officials noted that unrealized hedging is more an indicator of market conditions at a given time than of performance.
Balance Sheet
Total balance sheet debt, including capital leases, was $915 million at year-end, versus $618 million as of Dec. 31, 2010. This increase was mainly due to higher working capital use, stemming from increased product prices and business growth. The company took advantage of historically low market interest rates to lock in attractive long-term debt during the year, including a $150 million, 10-year term loan at the parent level and a $60 million, five-year term loan at its Moark subsidiary.
The company’s Long-Term Debt-to-Capital ratio was 41.3% as of Dec. 31, 2011, versus 32.5% at the end of the prior year. During 2011, the company received financial rating upgrades from both Standard and Poor’s and Moody’s Investors Services, achieving Investment Grade status with both agencies.
Business Unit Performance   
Dairy Foods
Land O’Lakes Dairy Foods business reported record sales of $4.3 billion, up 17% from 2010. Dairy Foods achieved pretax earnings of $28.1 million for the year, compared to $50.3 million in pretax earnings for 2010. These results reflect the impact of an uncertain general economy and late-year volatility in dairy markets. Dairy Foods 2011 results include a $6.5 million unrealized hedging loss (as of Dec. 31, 2011), while 2010 results included a $4.2 million unrealized hedging gain.
While Dairy Foods volumes were mixed, with overall retail volume down 6%, margins were strong nearly across-the-board. Notably, the company held its volume in its industry-leading branded butter and deli cheese product lines, and new, innovative products (like LAND O LAKES® spreadable tub butter and “Deli Health” cheese) performed well. 
The company’s Dairy Foods Business-to-Business operations outperformed the industry, with Foodservice volumes up 8% and Ingredients volumes up 1%. During the year, Land O’Lakes repositioned its global Dairy Powders business, shifting from selling dairy-based powders (through a marketing agency) as an unbranded commodity to the marketing of value-added, branded powder to key commercial customers.
Crop Inputs
(Seed, Crop Protection Products, Retail Agronomy Solutions)
The company’s Crop Inputs business – Winfield Solutions, LLC – reported a record $4.0 billion in 2011 sales, up 10% from the previous year. Pretax earnings in Crop Inputs were $140.4 million, down from 2010’s $144.8 million in pretax earnings. Results for Crop Inputs in 2011 include a $0.6 million unrealized hedging loss, versus a $1.9 million unrealized hedging loss at year-end 2010.
Volumes were strong in most segments, with alfalfa seed up 25%, corn up 8% and crop protection products up 22%.
The company also continued to deliver industry-leading crop production insights and technologies. Winfield Solutions expanded its unique Answer Plot® program, which gives growers a first-hand look at how products and technologies perform in the field at more than 180 demonstration sites. The business also launched its new R7® crop production tool, which brings together Answer Plot® data, weather information and satellite imagery to help growers optimize productivity, profitability and sustainability.
The company’s Feed business achieved a record $3.9 billion in net sales, up 19% from 2010. Feed generated $18.7 million in pretax earnings, versus $22.1 million in 2010. Feed results for 2011 include a $7.1 million unrealized hedging loss at year-end, while 2010 results included a $2.6 million unrealized hedging gain.
Stronger livestock markets, innovation leadership and targeted marketing contributed to a 13% increase in Livestock feed volume, with volume up in all key species. Lifestyle feed volume was down 5%, reflecting a decline in animals being fed (particularly in the equine segment).
Premium Lifestyle feeds, value-added Livestock feeds and the company’s industry- leading young animal Milk Replacers were Feed’s leading performers.
The company’s Layers/Eggs business, Moark, LLC, achieved $599 million in sales, up 17% from 2010. The eggs business reported a $3.3 million pretax loss for the year, compared to a $27.2 million pretax loss for 2010 (when results included a one-time charge for a legal settlement). Unrealized hedging impacts in this business were not significant.
Volumes were strong in the Eggs business, up 6% overall and up 17% in higher-value branded and specialty eggs. Those increases were offset by increased input costs, particularly feed.
Land O’Lakes, Inc. ( is a national, farmer-owned food and agricultural cooperative with annual sales of nearly $13 billion. Land O'Lakes is the nation’s second-largest agricultural cooperative and number 218 on the Fortune 500. The company does business in all 50 states and more than 60 countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the United States; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and ranchers with an extensive line of agricultural supplies (feed, seed, and crop protection products) and services. Land O’Lakes also provides agricultural assistance and technical training in more than 25 developing nations.
To see Land O’Lakes’ financial charts, go to the Land O’Lakes web site and click on the Investors tab. The charts are provided under the Quarterly Financial Statements link.
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