US dried pasta maker American Italian Pasta has said it expects to report a fourth-quarter net loss amid weak demand for pasta products in the US, and set out its plan to return to profitability in 2005.

The company said its fourth-quarter results were significantly impacted by continued and accelerated consumption declines in the US pasta industry, resulting in lower sales demand and reduced operating margins, primarily due to price competitiveness and rising costs.

Industry-wide retail consumption of dry pasta (as measured by ACNielsen) declined in volume by 4-5% and 6-7% for the 13-week and four-week periods ended 4 October 2004 respectively. During the fourth quarter, the company's retail revenues decreased by around 20% (on a 9% reduction in volume).

American Italian Pasta said sales of reduced carb products were nearly 50% less than earlier expectations in spite of heavy introductory marketing spending of US$3.9m during the quarter.

The company said it expects to report revenues of $99m for the fourth quarter and $417m for the year, down 15.1% for the quarter and 4.9% for the year. It expects a fourth-quarter net loss of $11.9m and full-year net income of $3.3m.

After what the company described as the most challenging year in its history, American Italian Pasta said its strategic plan is now focused on returning to several of its historical operating approaches and performance characteristics, including greater profitability, higher margins and lower production cost.

To achieve these objectives, the plan targets a smaller base of more profitable volume and includes profit improvement through price increases and/or cost reductions for all of its business units.

"After the painful experience in 2004 of consumption declines, over-capacities and related price and margin pressures, the limited consumer acceptance of high quality new reduced carb products, and our own restructuring and rightsizing programme, we believe that our 2005 business plan will return us to our profitable leadership position in the industry. With clear focus we will use our state-of-the-art manufacturing facilities as our key competitive advantage for high quality products, low cost production and excellent customer service," said CEO Tim Webster.