Low cattle prices, trimmed expenses see growth in profit
By MATEUSZ PERKOWSKI
One of the largest U.S. beef packers has reported a substantial increase in profits even as its overall sales decreased in the past year.
The National Beef Packing Co., which slaughters roughly one in seven head of fed cattle in the U.S., saw total revenues fall by about $400 million in its most recent fiscal year, to about $5.45 billion.
However, the firm's cost of sales dropped even more sharply, by about $425 million, primarily due to lower cattle prices, according to financial documents recently filed with the U.S. Securities and Exchange Commission.
The company also cut back on legal, travel and marketing expenses and reduced interest expenses by paying down debt.
Altogether, the company's net income increased 14 percent, from about $124.5 million in fiscal 2008 to $142.9 million in fiscal 2009.
About 69 percent of National Beef is owned by U.S. Premium Beef. The rancher- and feedlot-owned firm fulfills about one-fifth of the packer's annual cattle demand.
National Beef runs two major packing facilities in Kansas and a smaller, state-of-the-art plant in California, with a combined slaughter capacity of 14,000 head per day.
The firm also owns facilities geared toward value-added processing.
About 30 percent of the company's sales come from value-added products, such as "case-ready" beef cuts, which allow grocery stores to reduce the risks and expenses involved in slicing and portioning beef.
"We continue to focus on adding further processing, specialized cutting, packaging and other value-added components to our products that generate higher profitability," the company said in the SEC filing.
In the past year, the firm expanded its value-added venture by taking over a Missouri tanning facility, Prime Tanning, which produces leather for car seats, clothing and other goods.
That acquisition exposed National Beef to environmental liabilities, however.
The tannery is the subject of an Environmental Protection Agency investigation, as well as the target of numerous lawsuits that allege wastewater sludge from the facility was applied to fields as fertilizer, causing wrongful death and personal injury.