Michael Foods egg division shows 2006 loss

The Egg Products Division of Michael Foods, Minnetonka, Minn., showed a four percent decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the year ended Dec. 31, 2006.

Net sales for the year were $858 million, down $2.6 million from 2005, while EBITDA in 2006 was $137 million, down $5.1 million from 2005. For the quarter ended Dec. 31, net sales were $221 million, up $5.9 million from the same quarter a year earlier, while EBITDA of $36 million was slightly lower than the $36.6 million in 2005.

“We operated in a difficult input cost environment within our Egg Division,” president, chairman and CEO Gregg Ostrander said March 26. “Egg markets saw low levels early in the year, but strengthened substantially during the fourth quarter. We also experienced a substantial run-up in corn costs in the fourth quarter. With the rapid increase in our costs, we were unable to offset the cost increases in a timely manner with selective price increases.”

Ostrander said that as was true in 2005, the lower value-added portion of Michael Foods’ Egg Products business operated at a loss, while the higher value-added products performed well in total, although at somewhat lower levels of operating profit than in 2005. Unit sales for the division rose by two percent for the year.

Looking at this year, Ostrander said that “we are faced with ongoing cost pressures. In particular, corn costs, driven by robust ethanol demand, are very high and show few signs of abating. Given this significant cost headwind and the egg product market’s lag in adjusting prices to reflect such cost increases, we expect similar margin pressure to continue in 2007.”

In other Michael Foods’ news, the company has announced the hiring of David Johnson as president, Chief Operating Officer and CEO-elect. Johnson, 50, was formerly the president of Kraft Foods North America, where he spent 20 years, and previously worked at R.J.R. Nabisco. Johnson joined Michael Foods on April 2.