Riviana Foods Inc. (Nasdaq: RVFD) announced yesterday that as a result of higher energy and packaging costs, a competitive domestic rice market, and costs associated with restructuring the Company’s European operations at its United Kingdom subsidiary Stevens & Brotherton Ltd., the Company is reducing its near-term earnings outlook.
Current estimates indicate that diluted earnings for the third quarter of fiscal 2001 will be in the range of $0.10 to $0.14 per share versus $0.46 in fiscal 2000’s third quarter. The Company anticipates fiscal fourth quarter earnings will be in the range of $0.36 to $0.42 per diluted share versus $0.44 in fiscal 2000’s fourth quarter, while earnings for the year are expected to be in the range of $1.31 to $1.41 per diluted share versus $1.73 in fiscal 2000. These estimates include a one-time after tax charge of $0.07 per diluted share in the third quarter for restructuring and other charges in the United Kingdom. The charges include redundancy payments for terminated employees, excess facility costs and equipment and other asset write-downs. The Company believes these and other steps taken to reduce costs and increase sales will put its European operations on a more profitable footing beginning in the fiscal fourth quarter. As reported previously, Stevens & Brotherton experienced the loss of representation of two product lines in fiscal 2000 and is being realigned to reflect this change in operations.
“These estimates reflect the impact of several factors, including sharply higher energy costs and higher packaging costs,” said Joseph A. Hafner, Jr., president and chief executive officer. “Higher energy costs have a domino effect on every aspect of our domestic business, from production to distribution. These increases have exacerbated the effect of an extremely competitive domestic rice market. The record gas prices recently experienced along with record low temperatures had a negative financial effect on our rice processing operations. As a result of the competitive market conditions, we have not been able to pass along our increased processing costs, and in certain markets, we have increased our promotion activities to maintain our leading market shares.”
Hafner said the projected improvement in the fiscal fourth quarter, though still lower than the prior year earnings, is due to savings at the Company’s restructured European operations, a projected reduction in natural gas costs, manufacturing cost improvements from the implementation of energy and other cost savings projects as well as increased food service business.
Hafner added the Company’s Central American businesses will perform slightly better in fiscal 2001’s third and fourth quarters than in the prior year. Despite a poor economic outlook for Central America because of low coffee and banana prices and high energy costs, new products and production efficiency improvements are providing modest profit improvement.
“In spite of the expected earnings decline, Riviana continues to be a strong company,” Hafner emphasized. “While we still face challenges, our brand leadership and market shares for our key products are solid. We are working to reduce costs and improve operating efficiencies at our facilities worldwide, and we will continue to focus on effective promotional programs for our products. With our strong balance sheet and market leadership, we remain committed to searching out growth opportunities in our related businesses.”
Certain statements made in this press release which are not historical in nature are “forward-looking statements” and may involve risks and uncertainties which could cause actual future results to differ materially and adversely from those statements. The factors that could adversely affect our business include, among others:
fluctuations in domestic and foreign rice prices, which may be caused by changes in U.S. government farm support programs, changes in international agricultural and trading policies and weather conditions in the world’s major rice growing regions;
political, economic and other risks associated with our international operations, including exposure to currency rate fluctuations, currency exchange restrictions, potentially unfavorable changes in tax or other laws, partial or total expropriation and risks of war, terrorism and other civil disturbances;
our ability to maintain consumer loyalty, and to compete in the domestic rice market against our competitors who may have greater financial resources and in the international rice markets against local and multinational companies; and
the ability to realize cost savings as described in this release.
For additional information about factors that could affect our business, see the documents that we file with the Securities and Exchange Commission from time to time.
Based in Houston, Texas, Riviana Foods Inc. is one of the largest processors, marketers and distributors of branded and private-label rice products in the United States. Principal brands include Mahatma®, Carolina® and Success®. The Company has additional food operations in Central America and Europe.