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May 24, 2002

USA: Dakota Growers Pasta Co to sell stock to the public

Members of the Dakota Growers Pasta Co (DGP) have widely approved changing the grower- owned cooperative to a common stock corporation. The approval allows the conversion of cooperative shares to common stock that will be available for public trading. "DGP has evolved quickly during our first decade of existence, and this is one more important transitional change for us," said Chairman Jack Dalrymple: "Moving forward, we will work hard at developing a market for the original grower-members and potential new stockholders to trade their stock.

Members of the Dakota Growers Pasta Co (DGP) have widely approved changing the grower- owned cooperative to a common stock corporation. The approval allows the conversion of cooperative shares to common stock that will be available for public trading.

“DGP has evolved quickly during our first decade of existence, and this is one more important transitional change for us,” said Chairman Jack Dalrymple: “Moving forward, we will work hard at developing a market for the original grower-members and potential new stockholders to trade their stock.

“We intend to diligently develop the market through the pink sheets or over-the-counter stock transactions. Additionally, we will be talking to strategic investment equity partners.”

The dynamics of the pasta industry have changed dramatically since DGP entered the market ten years ago. “We missed out on some very appealing opportunities this past year, especially when Borden Foods exited the pasta business entirely. Under the corporate business structure, we are now in position to attract new investors and additional capital.” Dalrymple continued, “It’s important that DGP continues to make operational investments to remain competitive.”

Q3 profits rise sharply

Net earnings were US$2.2m for the Q3 ended 30 April 2002, up sharply from the US$1m net loss incurred for the same period in the prior year. Dakota Grower’s improved performance resulted from revenue growth combined with operational improvements, which reduced operating costs and increased supply chain efficiencies. Revenues for the quarter totalled US$37.7m compared to US$34.1m in 2001, primarily due to volume growth.

Net earnings for the nine months ended 30 April 2002 were US$6.5m; a US$10.4m increase over the US$3.9m net loss incurred for the nine months ended April 30, 2001. Revenues increased 13.3% to US$112.2m compared with US$99m last year.

Drivers for success

DGP is currently the third largest pasta manufacturer in the US, processing about 1.5 million pounds of pasta daily. The company said it would continue to grow upon its three core strengths (customer satisfaction, good reputation and manufacturing and supply chain efficiencies) in the future.

“Retail store brand continues to be a growing volume market,” Dodd said. Year-ending IRI data reports that store brand market share grew 12% while branded pasta lost 6% market share. “We are strategically aligned with three of the most aggressive supermarket chains in the US. We continue to grow other niche retail markets like dollar stores and organic.”

Foodservice will also be a targeted growth market for DGP: “We are partnered with the fastest-growing foodservice distributor in the world and have some very aggressive programmes in place to promote growth,” said Dodd. Diversification within the ingredient market will continue to play an important role in total sales.

Transition to a corporation

As part of the company’s transition to a corporation, DGP will maintain its ties with the northern plains premium durum producers through Series D Delivery Preferred Stock, which gives its holders delivery rights for high-quality durum wheat. In the new corporate structure, current members will have their ownership converted into Common Stock and Series D Delivery Preferred Stock.

“Consumers have become more concerned about food safety since the terrorist attacks on 11 September. Our direct link to the farmers allows DGP to trace durum and pasta quality safely throughout the entire system, thus guaranteeing food safety.” DGP has also implemented an identity preservation programme for one of its major customers.

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