National Beef attributes beef prices for cutting losses
January 14, 2009
by MEAT&POULTRY Staff
KANSAS CITY, MO. — Higher beef prices allowed Kansas City, Mo.-based National Beef Packing Co. LLC to slash its first-quarter loss versus a year ago, the company relays. Meanwhile, the sale of National Beef to Brazil-based JBS SA is on hold pending lawsuits filed by the Justice Department and more than a dozen states, according to The Associated Press.
On Jan. 13 National Beef, the nation's fourth-largest beef processor, reported a loss of $2.8 million during the three months ending Nov. 29 in a securities filing. During the same period a year ago, it lost $24.5 million.
Sales increased 2% to $1.43 billion, the company said. It added that a 6% increase in beef prices was offset by a 3.1% decline in the number of cattle processed.
In addition, Moody’s Investors Service on Jan. 14 changed the ratings outlook of National Beef to "stable" from "negative." The agency said a significant improvement in operating performance and credit metrics in fiscal 2008 justified the change.
Moody’s affirmed the National Beef corporate family rating at B2. "B" ratings are considered "speculative and subject to high credit risk" by Moody’s and are one rating above non-investment grade.
"Strong customer demand allowed for increased selling prices," Moody’s said of National Beef’s year ended Aug. 30. "Sales and earnings also benefited from continued growth in export markets, especially certain Asian markets, and the moderation of some commodity costs. This better operating environment resulted in a significant decline in leverage, with debt to EBITDA dropping from 6.1 times in fiscal 2007 to 3 times in fiscal 2008."
Also factoring into Moody’s outlook decision was an expectation that profitability will hold at a level appropriate for the company’s rating even though smaller cattle supplies may constrain margins in the years ahead and in anticipation of weaker consumer demand because of the recession.
Noting that the U.S. Department of Justice in October filed suit to halt an acquisition of National Beef by JBS S.A., Moody’s said its ratings and outlook are based on the current ownership structure of National Beef.
Moody’s outlook for National Beef had been negative since March 2008.