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Imperial Sugar falls 16% upon release of Q3 results

Published: 23:18 06 Aug 2010 BST

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Imperial Sugar Company (NASDAQ:IPSU) today reported a net loss of $5.7 million for the third fiscal quarter ending June 30 2010, compared to a net loss of $10.5 million for the same period last year, plummeting its share price by almost 16% to $11.44.


"Production at the Port Wentworth refinery and resulting sales volumes continued to increase during the quarter but more work is needed to achieve capacity operations," said John Sheptor, president and CEO of Imperial Sugar.


During the third quarter Port Wentworth's total production was in excess of 90% of normal operating periods. These higher production volumes and a 17% increase in sales prices resulted in an 83% increase in third quarter net sales to $261 million, compared to $142 million for Q3 2009.


"Equipment and process improvements led to better production volumes in the quarter, but the average production rate remains below our potential. To meet customer requirements, refining days were added, which increased the cost of production and reduced margin. As production rate is further increased, variable costs such as labor, maintenance and energy are expected to improve."


The cost of raw sugar purchased during the current quarter increased faster than the increase in sales pricing. This combined with suboptimal cost of production led to a lower gross margin. Gross margin as a percentage of sales was 0.7% compared to 0.2% in the prior year quarter.


At June 30 2010, the company had cash and cash equivalents of $19.7 million and $33 million of outstanding borrowings under the $100 million revolving credit agreement. Capital expenditures for the remainder of fiscal 2010 are expected to total between $10 million and $15 million, related primarily to the rebuild project at Port Wentworth and safety improvements at both refineries.


"Improving Port Wentworth operations remains our priority," Sheptor added. "Further equipment and process improvements are underway that should raise throughput. A higher production rate will dilute fixed costs and require less unit variable inputs. Tight industry supply conditions are leading to spot sales opportunities, and any added production above current sales commitments can be sold at attractive prices. Our target is to return margins to more normal levels through these efforts."


Imperial Sugar was founded in 1924 and is the successor to a cane sugar plantation and milling operation founded in Sugar Land, Texas in the early 1800s that began producing granulated sugar in 1843. It is one of the largest processors and marketers of refined sugar in the NAFTA region and refines, packages and distributes sugar at facilities located in Georgia and Louisiana. Additionally, through joint venture operations, the company markets sugar and other sweeteners in Mexico and Canada.

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