US pasta maker American Italian Pasta has reported a fall in quarterly net income, as the popularity of low-carb diets lowered demand for pasta products.

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The company reported net income of US$7.6m, or 41 cents per share, for the second quarter to 2 April, compared to $8.9m, or 48 cents per share, in the year-ago period.


Second-quarter revenues were $113.3m, up 2.4% from the year-earlier quarter, despite category volume declines.


Earlier this month the company said it was expecting second-quarter sales and earnings to fall short of internal targets due to declining pasta consumption. The company said the decline in pasta consumption accelerated during the second quarter. Retail consumption of dry pasta, as measured by AC Nielsen, declined by 7% in volume for the 13 weeks ended 20 March 2004, double the 3-4% decline experienced in all channels in the first fiscal quarter.


Revenue growth was driven primarily by the company’s introduction of a line of reduced carbohydrate pastas during the quarter. Retail revenues grew by 2.7% on volume declines of 2.6%.

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During the quarter, the American Italian Pasta incurred $2.6m of new product development and start-up costs. These costs represent the upfront investment in a portfolio of new low and reduced carb products.


“For the second half of fiscal year 2004, we believe that the consumer trends driving declines in traditional pasta consumption and sales will continue,” said CEO Timothy Webster.


“At this time, we are the leading manufacturer and marketer of low carb pasta (Atkins) and reduced carb pasta (where we have first mover advantage), however, it is too early to predict and quantify consumer demand for this new category of pasta products. We believe that our new products could become the market leader in an important new segment of the pasta market. However, we do not believe that in the short term, new product volumes will compensate for volume declines of traditional pasta,” Webster said.