After evaluating several repositioning options for its MoArk, LLC, egg business, Land O’Lakes, Inc., Arden Hills, Minn., has decided to “continue to operate the shell egg business for long-term value,” says Dan Knutson, chief financial officer, in discussing LOL’s third quarter results.

“Due to market conditions and the results of various discussions, we believe that we cannot receive fair value for MoArk at this time,” he says. Knudson says LOL will focus on further brand development, operating efficiency, the elimination of unproductive assets, and the expansion of LOL’s national market share. “This is a viable business with profit and growth potential, particularly in the branded and specialty market,” he says, “once markets return to an up cycle.”         

LOL reports a third-quarter pretax loss in its MoArk shell egg business of $29.7 million, compared to a $5.3 million loss for the same quarter a year ago. Earnings in the quarter include a one-time $15 million non-cash pretax impairment charge on the company’s remaining shell egg business, while 2005 earnings included a $7 million pretax asset sales gain.

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The company is reporting sales of $74 million in the quarter, down $22 million from the third quarter 2005, primarily due to the sale of the company’s liquid egg business in the second quarter.

Year to date, LOL  is reporting a $41.8 million pretax loss for its layer business, compared to a pretax loss of $27.6 million the previous year. Earnings for 2006 include an $8 million gain on the sale of the company’s liquid egg processing business and the $15 million impairment charge, while 2005 earnings include a $7 million pretax asset sales gain.

Knudson says that average shell egg prices over the first three quarters of 2006 were 74 cents per dozen, compared to 69 cents per dozen over the same period a year earlier and 95 cents in 2004. Year-to-date volumes are up about 4% in the shell egg business, led by branded and specialty eggs, up 24% over 2005.