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Ridley earnings up in “challenging” Q3

Feed maker Ridley Inc., in the midst of courting potential new owners, has posted improved quarterly earnings in the face of a shrinking Canadian swine herd.

Ridley on Thursday announced net earnings of $5 million on $167.3 million in revenue (all figures US$) for its third quarter ending March 31, compared to $3.1 million on $136.9 million in the year-earlier period.

The improvement was due largely to strong volumes in Ridley’s U.S. businesses, which CEO Steve VanRoekel said benefited from an “exceptionally cold winter season in contrast to last year,” as well as good margins and well-controlled operating costs.

That said, the operating environment for Ridley has become “increasingly challenging” due to increases and volatility in prices of raw materials for feed production, which in turn are pressuring the livestock and poultry sectors, the company said.

Ridley said it restructured its Canadian operations to try and cut operating costs during its first and second quarter, citing the first period of negative growth in over a decade for the Canadian swine industry, which is “already well into a significant herd reduction.”

“For the near-term, we are certainly concerned for the general economic health of our customers in all livestock sectors, especially pork producers,” VanRoekel said in Ridley’s release.

“At the same time, however, the herd liquidation already underway will eventually bring economic stability, and North America will continue to be the world’s most important supplier to meet the demand for food.”

Ridley in February called a halt to years of uncertainty over its financial future when it agreed to pay $6 million to end its exposure to class-action lawsuits over the arrival of BSE in Canada, while admitting no liability or wrongdoing.

Those lawsuits, in which the Canadian government remains a defendant, exposed Ridley to potentially several hundreds of millions of dollars in class-action claims by cattle producers.

Ridley announced Tuesday that its Australian majority shareholder, feed and salt maker Ridley Corp., wants to sell its 69 per cent stake in its North American business, which keeps dual head offices in Manitoba and Minnesota.

Ridley in turn has started contacting “potentially interested parties” to discuss “potential sale alternatives” both for Ridley Corp. and the TSX-traded company’s other shareholders.

The “potentially interested parties” haven’t been named. In an interview published Wednesday with Reuters reporter Roberta Rampton, Ridley chairman Brian Hayward noted that U.S. agri-food firm ADM and top Canadian grain handler Viterra have been buying up existing feed manufacturing capacity across North America, as has Ridley itself.

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