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>>> Lifeway Foods Announces Completion of $2.5 Million Production Capacity Expansion Project
Thursday February 7, 4:00 pm ET
MORTON GROVE, Ill., Feb. 7 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (Nasdaq: LWAY - News), makers of the nutritious, probiotic dairy beverage called Kefir, announced today the completion their production capacity expansion project at their main Morton Grove headquarters facility. The project, which cost approximately $2.5 million and took about one and a half years to complete, will approximately double Lifeway's existing production capacity.
Julie Smolyansky, Lifeway's CEO, commented, "We are very excited to have completed our first major expansion project in over 8 years. We have grown tremendously in the last few years and the time had come to increase our capacity to get ready for the future. Our main focus now is to obviously fill this new capacity, which is a very exciting prospect, and one which we are confident we will succeed in."
Edward Smolyansky, Lifeway's CFO, commented, "This expansion project gives us the much needed flexibility to finish moving the production of our Helios Organic kefir line, acquired in 2006, from its current production facility in Minnesota to our main Illinois facility, where we can use our larger scale and automated production efficiencies to produce at a lower unit cost."
About Lifeway Foods
Lifeway, recently named Fortune Small Business' 97th Fastest Growing Small Business, and one of only 4 companies to ever be named to the list four straight years in a row, is America's leading supplier of the cultured dairy product known as kefir, and now America's only supplier of Organic Kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these "friendly" cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs (TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding!. <<<
Market Watch analyst interview (see link at Yahoo). Lifeway is discussed approx half way through the interview. They criticize the company for the share buyback in the face of insider selling, and for lack of earnings guidance for the .03 cent quarter.
Humm... gfp927z... I have them at around $.07
I assume verse last Q.... price increase took hold, thus volume flat, thus about $350K straight to bottom line. Also assume 2% milk price down, thus 2% less Ingredient....
total COGS down to about 65% of revs or Operating profit up to 35%... back to $.07 EPS levels... IMO
Trader Joe's now has Kefir.... I hadn't seen it available there before. Is it new? It is private labeled; any idea who might be producing it for them?
I'm figuring Q4 earnings at around .04-.05 cents/share, which would be up from the .03 cents of Q3, but well behind the 0.7 and 0.8 cents/share of Q1-07 and Q2-07. Then hopefully EPS will gradually trend higher through 2008.
The big jump in revenues in H1-07 came from the Helios acquisition. Any idea if there are any additional acquisition targets out there?
I guess we should be hearing about the opening of the Starfruit shop in Chicago soon. I'd like to hear the CEO discuss her long term strategy for this retail concept.
looks like 3% q over q...
which is back on track - still want to see a 5% growth number - which would be fairly rapid growth. That said, good quarter revenue wise. Milk prices down - hopefully will go down more.
Humm.. I think $.075/share maybe?
ttm $.25 puts us trading PE of 44
I think now is the time to re-think forward.
Lifeway Foods Announces 29% Sales Increase for 4th Qtr. 2007 and New 100,000 Share Buyback Program Approval
- Total consolidated sales for the 4th quarter 2007 rose 29% to $10,170,000 from $7,894,000 in 2006.
- Total consolidated sales for the full 2007 year rose 40% to $38,725,000 from $27,720,000 in 2006.
- Board of Directors approves 100,000 share buyback program.
- December 2007 cost of milk approximately 7% lower compared to September 2007 highs.
MORTON GROVE, Ill., Jan. 7 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (Nasdaq: LWAY), makers of a nutritious, probiotic dairy beverage called Kefir, announced today for the fourth quarter ended December 31, 2007, total consolidated sales increased 29% to approximately $10,170,000 from $7,894,000 during the same period a year ago. This increase in sales was driven by the growth of Lifeway's main Kefir line and Lifeway's Helios Kefir line.
In addition, Lifeway's Board of Directors approved a new share repurchase program of up to 100,000 shares. Under such a program, Lifeway Foods may repurchase up to 100,000 shares of the Company's Common Stock through the open market within a period of one year from the date of the first purchase. The Company will use its available cash resources to fund the stock repurchase program.
Julie Smolyansky, Lifeway's CEO, commented, 'The fourth quarter 2007 was another outstanding quarter for Lifeway Foods. Both of our main brands, the Lifeway and Helios Kefir line's, had their best quarters in terms of revenues ever. We are seeing that Kefir continues to grow in popularity and expect that 2008 will be yet another strong year.' Smolyansky added, 'We are also very pleased that our Board of Directors has approved another share repurchase program. In 2007 we repurchased 75,000 shares, and this new 100,000 share approval demonstrates our continuing commitment to growth and enhancing shareholder value.'
Edward Smolyansky, Lifeway's CFO, commented, 'We are extremely pleased to finish out the year in strong fashion by surpassing the $10 million dollar quarterly revenue threshold. We had fought rising raw material costs all year and are pleased to see that in December 2007, the price of conventional milk, our largest cost of goods sold component, decreased by approximately 7% from the September 2007 highs, and are hopeful this trend will continue in 2008.'
really don't know...
but on the Starfruit shops - I feel it's a great idea to open a few and see how it goes. It's a catalyst for the stock and it's great exposure for the product. Have seen other opinions just the opposite - so who knows what's best.
Thanks OldPro. Having bought the main US kefir competitor in 2006 (Helios), do you see any other potential acquisitions out there for Lifeway to consider? Also, any ideas on how far Lifeway intends to take the retail outlet/Starfruit concept? Thanks.
only have thoughts...
nothing more - as only the Smolyansky family knows. Absolutely think Danone has considered buyout, but I hope Lifeway would not go for a it just yet. Want them to wait for the possibility of a "Kefir craze" - which may come anytime over the next 5 years IMO. Then company will be worth lots more.
Danone owns a part of Lifeway now and would have to make some fairly significant changes to enter the kefir market - so I expect them to extend the non-compete just like they have in the past - for another year.
I own fewer shares than I have historically due the miss, but am ready to buy lots - finger is on the trigger - just trying for the best price and not sure where that is right now (maybe 10, maybe now as low as it goes - seems to be back on uptrend). They were so close to breaking out to the big time and then had the set back with the earnings miss and stagnant quarter over quarter revenue. The last quarter killed their IBD ratings - which is what many funds use to buy or sell.
I truly believe it's only temporary.
OldPro, Just wondering if you have a feel for how much buyout interest there could be out there for Lifeway, and how receptive the Smolyansky family might be to a buyout? I see the family owns approx 70% of the company (mainly Ludmila who I assume is Julie's mom?) Thanks for any insights.
Also, any ideas on whether Danone might decide not to extend the non-compete clause, and instead choose to enter the US kefir market? Thanks.
Looking at valuation, if we assume an EPS recovery from the recent dismal .03/shr back to an average of say .05/shr per quarter over the next year, then we still have a forward PE of 61. Such a high valuation can only be sustained if we see a return to rapid revenue/earnings growth. Yahoo's forward PE estimate of 44 assumes a return to the .07/shr EPS levels of Q1 and Q2.
The company raised prices across the board which could help, but that strategy might backfire if the higher prices cut into sales. Revenues were already flat from Q2 to Q3. The other big wildcard is whether/how much milk prices will moderate.
Bottomline, I figure a repeat of the last .03 cent EPS quarter could put the stock well under $10, but a .05 cent EPS quarter might justify the current valuation.
On the other hand,
from a promo for a $5K report on Probiotics from UBIC Consulting
http://www.ubic-consulting.com/template/fs/The%20World%20Probiotic_synbiotic%20Ingredient%20Market.pdf
Competitive Risk seems to be one the negatives mentioned often by critics of Lifeway, citing the apparently iffy relationship with Danone and the relatively low barriers to entry. Any thoughts about what the following may mean in that regard:?
"Danone enters Indian market sans Wadias
20 Dec 2007, 0021 hrs IST,TNN
SMS NEWS to 58888 for latest updates
NEW DELHI: French dairy giant Group Danone kicked off its joint venture with Yakult of Japan to manufacture probiotic drinks in the country.
The venture also marks the entry of Danone in the country, outside the tie-up it has with the Wadias for confectionery major, Britannia."
http://timesofindia.indiatimes.com/Danone_enters_Indian_market/articleshow/2635834.cms
Lifeway Kefir is now in the mainstream. I just found Lifeway Kefir in the Dairy Section right smack in the middle of Yogurts etc at Stop & Shop. Other Stores have hidden it in the organic food section. This Stop and Shop is small and previously did not carry Kefir. They had 12 facings including the new Pomegranate Kefir. The shelf was more than half gone. The Pomegranate Kefir is awesome.
Bill
OldPro, With P/E over 60 again, the valuation is back into nose bleed range. I'm guessing the stock continues its bounce up to around 14, but then settles back into the 10-12 range awaiting the next quarterly earnings numbers.
Coverge intiated...
6-Dec-07 Lazard Capital Initiated Buy
guess this means around 10 was the bottom. big move today, will look to add on pull backs. missed the move even though saw the buy rating - just didn't think it had it in it yet.
Forbes article 11-20-07 -
>>> Wise Beyond Her Years
Matthew Kirdahy, 11.20.07, 1:30 PM ET
One minute your dad is explaining the nuts and bolts of the family business. The next minute, you're its CEO, at 27.
Julie Smolyansky, chief executive of the publicly traded Lifeway Foods, was going to be a psychologist. Suddenly, her dad died of a heart attack, and someone had to step up and run the show.
Smolyansky, now 32, is one of the youngest CEOs of publicly traded companies in the U.S. But that doesn't seem to faze her, or the business. Her determination has had nothing to do with age.
"It's funny, because I don't feel that I'm so young anymore," said Smolyansky. "I feel like I've gotten a couple of years under my belt, and I actually feel like I'm right there with some of the older people. I've always kind of felt that I have an old soul, but I feel like I do now for sure. It's going to be interesting to see how the next 20 years of my life pan out."
Lifeway, which makes health-food products, reported Friday a 32% jump in sales for its third quarter, however, profits were down 4% to $2.72 million, from $2.82 million the same period a year ago, as Lifeway faced increased production costs.
Year to date, shares of the Illinois-based company are up more than 21%, or $2. The company has annual revenue of $27.7 million. Smolyansky earned about $195,200 in 2006. Her mother Ludmila is director and chair of the board, and her brother Edward is CFO.
Forbes.com: What was it like taking the title of CEO of a publicly traded company at age 27 after the sudden passing of your father?
Smolyansky: At that age, it was very stressful, obviously, not knowing that this was going to happen and not being prepared for it at that moment. Dad had always told us that we would be able to take over his business and he would prepare us to do so if we were interested. At that time, I was interested.
[My brother Edward] started within four months of graduating college. He was really super entry level. My dad was intending to groom him, but I was the older one and I had been in the business from 1997 to 2002. Being in the family, it became something we talked about at the kitchen table. So we had kind of known about a lot of things happening anyways.
Was this a business you knew you were going to get into from the beginning?
I was actually studying to be a psychologist. So I was attending graduate school and I worked for my father part-time in data entry. I had no intention of going into business with him. Looking back on it now, I could see how my interest in schooling and what I was interested in became very close to what I actually ended up doing in my job. It wasn't too far removed. At the time, it seemed very off, but now looking back on it, it actually makes a lot of sense.
I had always been interested in nutrition and how we eat and a healthy lifestyle. And I don't know if that was just a consequence of just being a young woman. My interest in school was in advertising and how it affected how we eat, or our behaviors and how we could influence it positively or negatively.
We can be more involved in the community and in doing positive things for the Earth, but I think that's something that's relative to all business in our world. I feel that, at least in my company, we take very active measures to at least try and not to do any harm to our Earth. For example, renewable energy is something that we purchase. We are carbon neutral, and our footprint, we made neutral. Being a manufacturer, I feel positive about that step that we've taken.
They say women are the conscious nurturers, so I don't know if that's just me, my role, but that's something that's really important to me. I don't know how men think about it, but it's something that I think about actively. Being a young leader in this time, that's something I see the young people doing, and I sort of 'clean up' what our parents kind of made wrong.
You're still young by conventional standards, and already a CEO. What's left to accomplish as a professional?
Our stock dropped [when] we announced that my father passed away. The stock price went down and it took some time and a couple quarters to get it back up. To kind of gain trust and show people that we could continue.
To be honest, I didn't have the feeling that it wasn't going to be successful or that we weren't going to do great things. I knew everything was going to be OK, it was just that more of my own personal struggle with losing our leader and losing my father and having this all happen in one shot. But never, ever did I imagine that the company wasn't going to do amazing and great things.
What do you do to stay sharp and in tune with industry trends? Do you engage in any activities to improve your leadership skills?
I do bounce my ideas off several mentors and do engulf myself in business books or things like Donny Deutsch, and I think it's really interesting to listen to entrepreneurs or leaders who think of different ways to do things. I try to see any speakers in my city, or anything that I get invited to. I try to see things that are relevant and talk to as many people as I can and get perspectives. And I've definitely taken up as many things as I can to put myself out there to communicate with someone and maybe meet a great CEO who I wouldn't meet otherwise.
Have you any idols or role models in business?
My father and my mother were obviously both great role models, and if I didn't have either one of them, I probably wouldn't be here today. But I think that both of them were just incredible entrepreneurs. She has started five delicatessens over the course of her life here in the States, just two years after coming. It's a small business, but it's a really successful one, and just seeing her doing it and working and achieving something and working toward the goals she set, you learn that anything is possible.
It never really entered my mind that a woman couldn't do X, Y and Z. My father had always made a very active step in showing me role models. And actively saying 'Oh, here, look at this person; look at what they're doing.'
When I was in high school, I'd come home and there was a special on CNN about Christie Hefner and her business and leadership. My father would say, 'look at this young woman.' She was very young when she started ,and she took over her father's big multi-million company--and in an industry that's probably controversial for a female to be running--and look at all the things that she's done. He said, 'I want you to do that. I want you to be just like her.'
My father would push me out there and made sure that I was confident. And I had the chance to meet her [Hefner] a couple times, and I'm just amazed. I had some great opportunities to meet some amazing CEOs, and I just kind of draw on all their experiences.
It's very easy to have a lower self confidence about your leadership style, I think--that you're never good enough. I feel the opposite--and it took me some years to get there.
What's been the main obstacle for you in running Lifeway?
My father start[ed] a business as a Russian immigrant with no finances, with no network of support. I think that I'm actually luckier than him, because I have a Rolodex of friends from high school, from college. He didn't have a fraternity. He didn't have friends that were here. He started it all, and he had a strong, heavy Russian accent, and I'm sure that can't be easy on Wall Street or when you're talking to investors. That was his obstacle to overcome. Being a young female might be my obstacle. Young, specifically--I don't know if female is true anymore, at least in my industry. There are a lot of women in the food business and in the natural business. So I think it's a great category to be in.
What does the future of Lifeway foods look like?
I think the sky's the limit. I can't really answer that. I just go day by day, week by week, month by month and year by year. We have great plans to continue to grow and be creative and innovative within the company that markets the whole category. I would just like to continue to build the brand.
I would like Lifeway to be as known as any other brand that we can think of. I really just hope we can implement on all the things that we've done. But I don't have an actual dollar number...if you're looking for it [laughs]. <<<
MF article 11-19-07 -
>>> Lifeway Relives History
http://www.fool.com/investing/general/2007/11/19/lifeway-relives-history.aspx
Rich Smith
November 19, 2007
It was back-to-the-future time for Lifeway Foods (Nasdaq: LWAY) last week.
Consider this line from my column on the company's Q2 2004 earnings: "In the second quarter of 2004, Lifeway experienced a small complication: The price of the main ingredient for its products doubled. Oops." For shareholders, "Oops" probably felt like an understatement, as they watched the value of their investment drop 17% in a day of panicked selling. So it should come as no surprise to Lifeway shareholders that Thursday's 23% collapse had a similar catalyst: a 110% increase in the cost of milk.
Curdling margins
This staggering increase in price for a product that forms a significant portion of Lifeway's cost of goods sold (COGS) curdled what should have been an exceptional quarter of 32% sales growth. But COGS ran laps around sales growth, rising 54% versus Q3 of last year. As a percentage of sales, COGS was a staggering 72% (compared to 62% during the same period in 2006), and gross profit declined more than 1,000 basis points to 27.7%.
With food costs on the rise and milk selling at all-time highs, nearly every restaurant franchise is facing margin pressure. Dairy costs dumped on Kraft (NYSE: KFT) and Dean Foods (NYSE: DF), losing 240 and 640 basis points, respectively, in gross margin. Even Starbucks (Nasdaq: SBUX) experienced less-caffeinated results last week, with dairy costs weighing on the bottom line. Meanwhile, the maker of Yoplait yogurt (but also numerous nondairy foodstuffs), General Mills (NYSE: GIS), managed to gain 40 basis points. So Lifeway appears to be the hardest-hit among companies subject to the dairy drought.
Aside from that, Mrs. Lincoln, how was the play?
The good news is that this was pretty much the extent of the bad news (at least in the income statement). The cash flow statement, which Lifeway inexplicably leaves out of its press releases, shows cash profits running about 75% lower in the first three quarters, compared to the first nine months of last year.
Lifeway is doing its best to mitigate a bad situation by reining in the costs it can control. Marketing costs paced sales growth at 32%. Meanwhile, increasing economies of scale as Lifeway grows helped keep general and administrative expenses growing at half the rate of sales. Such cost controls helped pare the decline in operating margins to about 900 basis points, leaving them at 5.9% for the quarter. Meanwhile, the ever-mysterious line entry for "Gain (loss) on sale of marketable securities" more than doubled in value.
Damage control only goes so far, however. In the end, the firm wound up with a net margin of only 4.8% for the quarter, less than half last year's performance. So why did the shares rebound on Friday? I'm only guessing, but I've got a sneaking suspicion I heard the "slam" of short-sellers closing their positions, followed by the clink of coins as they counted their winnings. <<<
Yes, they need to have a conference call every quarter.
Milk prices are headed...
http://www.agriview.com/articles/2007/11/30/dairy_news/dairy01.txt
and this means....
Managing expectations
is one of the most important & difficult
jobs for any CEO.
Ms. Smolansky has clearly not done a good job at this.
Perhaps she has learned something here? Or have we?
BTW, when IS the earnings conference call?
Lifeway Foods Announces Full Product Line Price Increase
MORTON GROVE, Ill., Nov. 29 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (Nasdaq: LWAY), makers of a nutritious, probiotic dairy beverage called Kefir, announced today that it will implement a price increase of approximately 10-15% on it's full catalog of products. This price increase will go into effect in December 2007.
Julie Smolyansky, Lifeway's CEO, commented, 'We would like to reiterate that our main goal at this time as a growing company in a competitive food industry is to continue to grow our revenues, build a strong brand, and expand our loyal customer base, and part of this strategy has and will continue to be to maintain a relatively lower price on a per ounce basis when compared to other similar products on the market. However, given the current environment of historically high raw material prices as well as other rising costs, a price increase was necessary. We are confident given the uniqueness of our Kefir products and our dominance in the Kefir market, our past price adjustment experiences, conversations with our customers, as well as the higher current price environment for similar products, this price increase should have no negative impact on our unit sales.'
About Lifeway Foods
Lifeway, recently named Fortune Small Business' 97th Fastest Growing Small Business, and one of only 4 companies to ever be named to the list four straight years in a row, is America's leading supplier of the cultured dairy product known as kefir, and now America's only supplier of Organic Kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these 'friendly' cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs(TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding!.
For more information, contact Julie Smolyansky at Lifeway Foods, Inc. at (847) 967-1010 or e-mail at info@lifeway.net and visit http://www.lifeway.net.
This news release contains forward-looking statements. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission.
SOURCE Lifeway Foods, Inc.
Source: PR Newswire (November 29, 2007 - 4:05 PM EST)
News on raising prices...
was bound to happen with milk prices still high. won't keep me from buying - am addicted. bought on dip under $10 - looks like good buy but never know.
I am a big buyer of cream cheese. My price dropped 10% this week. It does not usually drop that much so fast.
Bill
>>> Chinese demand helps drive up milk prices
Growing taste for Starbucks, McDonald's helps drive up costs worldwide
The Associated Press
Updated: 5:59 p.m. ET Aug 10, 2007
PARIS - Unlike oil, we probably won’t ever run out of milk. But the two liquids have one thing in common: They’re trading at record highs. Reasons include growing appetites for dairy foods in China and elsewhere in Asia, where chains such as McDonald’s and Starbucks are introducing unfamiliar taste buds to cheeseburgers and lattes. Other factors are rising costs for animal feed, shrinking European production and long-standing drought in Australia and New Zealand, the world’s largest milk-exporting region.
Paying more for milk is causing an uproar in Germany, where families consider providing children with an affordable glass of milk a fundamental right. It is also a concern for consumers in the United States and elsewhere in Europe.
Milk prices hit a record last month in the United States, where consumers paid an average $3.80 a gallon, compared to $3.29 in January, according to the U.S. Department of Agriculture. It forecasts prices will remain high throughout the year.
Prices are likely to remain high worldwide until dairy farmers add more cows or shift production to powders, which are more easily traded than the liquid stuff.
International dairy prices increased 46 percent between November 2006 and April 2007, with milk powder prices increasing even faster, according to the Food and Agriculture Organization.
Companies like candy giant Hershey Co. that use dairy for their products are feeling the pinch. But in many parts of the globe, dairy farmers are cheering.
“Global demand has been extraordinary for American dairy products, but global supplies of dairy products have been exceptionally tight,” said Michael Marsh, head of the Western United Dairyman trade group in California, the top dairy-producing U.S. state. “From the American dairy farmers’ perspective, you have almost a perfect storm.”
In China, milk consumption has soared along with rising incomes, a massive expansion of the dairy industry and the increasing familiarity with — and taste for — non-native foods among young urbanites.
Pizza Hut sells its cheese-laden pies even in smaller Chinese cities, and milk, yogurt and individually packaged cheese slices can be found in small local supermarket chains. Foreign-owned stores such as France’s Carrefour, Germany’s Metro and America’s Wal-Mart cater to slightly more sophisticated tastes, selling crumbly blue cheeses, wheels of gouda and red-waxed balls of Edam.
Products from Chinese dairy giant Mengniu even carry the label of being the official milk of the Chinese space program. Its drinks promise to “fortify the Chinese people,” with packaging showing a space-suited boy clutching a glass of creamy goodness.
China’s growing love of dairy is a far cry from two decades ago, when the country was just opening up to foreign products and availability was limited to milk, yogurt and, on rare occasions, butter. The Dairy Association of China estimates consumption will rise by 15-20 percent annually in the coming years.
Premier Wen Jiabao, on a visit to a dairy farm last year, said his “dream” is for each Chinese child to consume a pint per day. He is boosting production to try to keep up with demand, but the world’s most-populous nation remains a net importer of dairy products, including milk powders.
The boom in biofuels is also pushing up corn prices and, as a result, making animal feed more expensive. Farmers have responded by raising milk prices.
Governments in the United States, Canada, the European Union and Japan have a range of policies, including tariffs and quotas, that insulate their milk from international prices, according to the Food and Agriculture Organization.
These systems are under strain, as high rewards in the globalized market are inspiring milk producers to challenge the old practices.
In Germany, where milk prices are set annually after negotiations between producers and powerful retailers, retailers have been holding prices down to the tune of almost 15 percent since 2002. Since July, they’ve been paying producers an extra 5 to 7 cents a quart after the producers threatened to take their milk elsewhere.
Since May, the price for a half-pound package of butter has gone up from $1.06 to $1.13 in Germany, while the price for a gallon of milk has increased from $3.20 to $3.60.
In a country where beer is cheaper than milk, higher prices for dairy products have led to a flurry of condemnation.
Germany’s HDE retail association blames the Chinese and European Union milk quotas. The quota system, imposed since 1984, prevents farmers from producing more to keep up with demand.
The quota system will come to an end in 2015. In the meantime, EU spokesman Philip Tod said the EU Commission is allowing small — 0.5 percent — annual increases in quotas through 2008.
Hershey Co.’s chief executive officer, Richard H. Lenny, said America’s largest candy maker may adjust its formula to use less lactose because of rising milk costs. Candy bar prices will also be reviewed, he said.
Franck Riboud, head of French yogurt maker Groupe Danone SA, said last month he will raise the price of dairy products in France by 2.5 percent, the first increase in two years, to help compensate for the rise in prices.
In the United States, milk processors and distributors “are being challenged by the most stubbornly inflationary dairy markets in history,” said Gregg Engles, CEO of Dallas-based Dean Foods, the largest U.S. processor and distributor of milk and other dairy products, where profits are down. <<<
great, & oh yeah - happy thanksgiving - em
I put Class II type milk price in the box....
and Happy Thanksgiving to all...
here's an example of what...
I knew was happening in speaking with some farming industry vets- the corn harvest was huge {more than enough to meet ethanol needs} and final numbers have not yet come out, but they will in January. Will it drop the price of milk? To the extent that milk prices are impacted by corn prices it should - since corn prices should go down.
Corn Belt enjoys big-time harvest
Illinois growers reap 2.31 billion bushels from '07 crop
By JIM SUHR
THE ASSOCIATED PRESS
Published Thursday, November 22, 2007
Earl Williams has heard the joke about how farmers always find a reason to complain. But like many Midwest farmers, the northern Illinois grower of corn and soybeans has no gripes this year.
"It's probably the best corn crop I've ever had," Williams, 57, said from his land near Rockford, where yields in some fields almost doubled over last year.
Friendly weather that included 14 inches of crop-quenching August rain propelled Williams to banner yields - 140 to 205 bushels per acre over his roughly 650 acres of corn, complemented by yields of 38 to 61 bushels per acres over about 500 soybean acres.
Such testimonials are common throughout the nation's Corn Belt, where farmers who converted soybean acreage into cornfields to meet expected demand from would-be ethanol plants were rewarded with big-time harvests and relatively high prices.
Illinois corn growers reaped 2.31 billion bushels, 27 percent more than last year, from more than 13 million acres, nearly 2 million acres more than 2006, the Illinois Farm Bureau's John Hawkins said. The average yield of 178 bushels per acre is the second biggest in the state, where records date to 1866, Hawkins said.
The corn harvest appears equally robust across the country. Though official numbers won't come until January, Hawkins said, estimates are that U.S. corn growers produced a record 13.2 billion bushels of corn, one-fourth more than last year. The roughly 86 million acres of harvested cornfields - the most since 1933 - had an average yield of 153 bushels, falling short of the 2004 record of 161 bushels.
Other Corn Belt states are posting big numbers. According to U.S. Agriculture Department estimates, North Dakota's corn production will be 279 million bushels and Nebraska's 1.5 billion bushels - both records. Nebraska's average yield is expected to be 162 bushels an acre, second only to 2004.
Iowa farmers reportedly harvested a record 2.44 billion bushels of corn from roughly 14 million acres, averaging 175 bushels an acre compared with 166 bushels an acre last year.
Overall soybean production fell, largely because of farmers' shift to corn and the lack of rainfall at key times during the growing season, but prices remain strong.
Illinois soybean growers turned out nearly 361 million bushels, down 25 percent from a year ago, Hawkins said. The yield averaged 44 bushels over the state's 8.2 million acres of soybeans, a slide from 48 bushels for the slightly more than 10 million acres last year.
U.S. farmers brought in 2.6 billion bushels from 62.8 million acres of soybeans, averaging 41.3 bushels per acre.
All told, "it was a very good year for all grains" when it came to pricing on everything from wheat to beans, said Rick Tolman, the National Corn Growers Association's chief executive.
The good thing about Lifeway's earnings being so closely linked to the cost of milk is that predicting quarterly earnings going forward should be fairly easy -- just closely monitor milk prices throughout the quarter.
I was lucky here and suspected not good when revs were flat... but failed to see the future at GXYF...That's why I feel so stupid.. LOL... same dairy cost issues...
going forward.. if all 8 of us here follow milk price.. freight.. and growth... might make some money...
I really believe price increases would hold if all would just try... it very hard to get prices up at retails...
go colts!
great number crunching and insight...
into impacts of milk prices and other costs. Please keep us posted as your insight grows and numbers go through the iterations that numbers always do.
how quick they turn...
lesson learned long time ago - sometimes forgotten and the reminder cost me some money. Saw sharpened, lesson reinforced, smarter going forward - I hope.
Lifeway mentioned in negative MF article -
>>> Thursday's Worst Stocks in the World
http://www.fool.com/investing/general/2007/11/16/thursdays-worst-stocks-in-the-world.aspx
Tim Beyers
November 16, 2007
Bad days. We all have them; some of us deserve them.
Here are five stocks whose naughty ways drew investors' scorn on Thursday:
Company
Closing Price
CAPS Rating (5 max)
% Change
52-Week Range
Lifeway Foods (Nasdaq: LWAY)
$10.60
**
(22.74%)
$7.85-$20.75
AFC Enterprises (Nasdaq: AFCE)
$11.03
*
(11.12%)
Not avail.
Shutterfly (Nasdaq: SFLY)
$26.70
**
(10.97%)
$13.20-$37.00
Fannie Mae (NYSE: FNM)
$43.04
*
(10.00%)
$42.16-$47.06
Downey Financial (NYSE: DSL)
$30.76
*
(9.85%)
$28.37-$75.06
Sources: The Wall Street Journal, Yahoo! Finance, Motley Fool CAPS.
Naughty?
Well, OK, we can't exactly call these stocks naughty. But none of them get much love from our 74,000-person-strong Motley Fool CAPS community of amateur and professional stock pickers.
To the contrary -- when it comes to these stocks, CAPS investors have gone thumbs down more often than film critic Roger Ebert. They don't believe any of these stocks are worth owning, and that some may be worth shorting.
Which of today's candidates is worst? Read on, dear Fool.
Worse
We begin with mortgage financier Fannie Mae, a Motley Fool Inside Value pick, which, along with sister firm Freddie Mac (NYSE: FRE), is still out of compliance with federal regulations. Quoting a report issued by its regulators onThursday morning:
In 2007, both enterprises continued to make progress, but neither company has completed all of the items identified in their consent orders.
Consent orders limiting the size and scope of Fannie Mae's mortgage portfolio were issued in May 2006, after a three-year investigation uncovered serious accounting issues. Apparently not all of them have been resolved.
Growth with a ceiling? Sounds like a winner of a stock to me. In Bizarro Fooldom, that is.
Worser
Next up is digital photo diva Shutterfly, which was down for reasons not yet reported. But richly valued stocks that boast no competitive advantage can be like that.
I'm serious. What does Shutterfly do that others don't? Sure, there are those photobooks, but I can't envision American Greetings (NYSE: AM) and Kodak being more than a quarter or two away from offering excellent alternatives.
And it's not like management is producing excellent returns while Shutterfly has a lead. To the contrary:
Metrics
Trailing Twelve Months
2006
2005
Return on capital
2%
4.2%
7.3%
Return on equity
5.1%
5.4%
76.8%
Source: Capital IQ, a division of Standard & Poor's.
CAPS All-Star maverickpl put it best last month, I think. Quoting: "Who is buying this at over 100 times earnings? My only logical explanation is that they've discovered time travel and whisked themselves into the late '90s."
'Nuff said.
Worst
But our winner is Lifeway Foods, which isn't an easy call for me. I like what the company is trying to do: make healthy dairy products. Good idea.
Trouble is, the business depends on milk, and milk can apparently get really expensive. Gross margin declined by four percentage points in Q3 thanks to record prices.
Here's how Lifeway CEO Julie Smolyansky put it:
Despite record high milk and transportation costs, as well as operating in an environment where most of our other production-related costs are increasing, we were able to maintain relatively healthy margins. The cost of milk hit a record high in the month of September, and has since dropped slightly in October, a trend we hope but cannot be assured of continues. (Emphasis added.)
Translation: Production costs are mostly out of our hands.
Scary thought, isn't it? It is for me, especially after looking at the cash flow statement, which you can find on page 7 in the 10-QSB report filed with the SEC. Free cash flow fell by 75% through the first nine months of 2007.
Yuck. Perhaps Lifeway should raise cows and buy some pasteurizing equipment?
Lifeway Foods and the milkmen who are drinking up its margins and cash flow ... Thursday's worst stock in the CAPS world.
Do you agree? Disagree? Let us know what you think by signing up for CAPS today. It's 100% free to participate.
See you back here Monday for more stock horror stories. <<<
More On milk price....
I think if ya can figure out COGS, as it relates to Milk price you'll be ahead of the game here....
So here goes...
COGS
2Q COGS = 5,886,186
3Q COGS = 7,096,819
7,096,819/5,886,186 = 21% increase
Milk Price
2Q avg = 16.67333333
3Q avg = 21.99
21.99/16.67 = 31% increase
Labor
the Q reports says labor increase 15%...This is about the as 10K05 report says labor increase 18% and they said then it had 2% effect on COGS... so....
21% - 2% = 19%
Packaging and freight!
freight using GXYF compares .05% increase and plastics are higher 1%....
19% - 1.5% = 17.5%
thus Giff concludes for every 1% move on Class II Price milk price has .564% effect COGS... For example...
If price of milk had 0% increase..
0% x .564% = $0
10% x .564% = 5.6% increase in COSG (1.56*5.8 mil = $6.2 mil vs 3Q)
So here we go.... Does this company hedge?? http://futures.tradingcharts.com/marketquotes/DA.html
Oct 2007 = 21.9
Nov 2007 = Futures...19.20
Dec 2007 = Futures...19.55
4Q avg maybe = 20.21
3Q avg = 21.99
20.21/21.99 = (8.1%)
Thus 8.1 x .564% = (4.56%) effect on COGS...
so assume same sales the COGS 7,096,819 - 4.56% = 6,772,494
meaning $6.8/$9,8 = 69% COGS.. and 100%-69% = 31% gross margins...
2Q to 3Q revs increase 1%... I think 4Q will be higher! What.. WAG??? Anybody want to take a guess?
and what about price increases? I say they do at least 5%....
Anybody want to make some assumption on Q on Q growth for 2008?
I don't think Vitaminwater and Kefir compete for shelf space... Kefir is in the refrigerated section.
seems reasonable - they may...
have also, to some degree, thought/hoped raw milk prices would sink back down instead of spike back up - at least that's what I thought and it just didn't work out - for whatever reason.
Course I also though they would have 3 - 8% quarter over quarter revenue growth, and when it came in near flat - was disappointed.
Still believe in the company - but they are definitely not on cruise control and will need to fight their way back into favor with the institutional investors - exceptional performance going forward is the way.
The obvious response to higher milk prices and increased GOGS for Lifeway may have been an easily accomplished remedy at any other time, however the timing was not good for a price increase for the following reason. Coke recently took over distribution of its newly purchased Vitaminwater product line and desperately wants to increase Vitaminwater shelf space asap. Although Vitaminwater is not a direct competitor to Kefir, Coke can make it very attractive to a retailer to give them more shelf space. Lifeway may have decided to forgo an increase and not rock the boat until the Coke/Vitaminwater surge settles. This is just my theory. What do others think?
Bill
http://www.usatoday.com/money/industries/food/2007-05-25-coke-glaceau_N.htm
I think there is a way to figure COGS and how that relates to milk price... and better predict what will happen here... going to give that some thought...
Same effect at GXYF.. the company does all the right things and gets killed by the dairy price going up so fast..
OK.. by far you not stupid... but me yes.. simi-stupid maybe right.. LOL.. advisor says hard headed...
anyway.. bought QID
ho der gif - me stooopid...
knot yuuz. guess I worded that wrong. nothing wrong with shorting - it's part of the total market. you called it pretty close last time and although I didn't short, did end up selling some a "short" time later and saved some profits.
like to hear all sides, otherwise get a skewed picture - even like to board battle sometimes just to see if what I'm thinking holds up
me not so stupid to realize that am often wrong - just keep learning from all the stupid mistakes - lol
So you call me simi-stupid...
I've been called that before.. LOL ... but shorting is valid trading practice? I will quit talking about shorting here...
It seems these food companies cannot just raise price fast enough to recover COGS... They are so dependant on on the retailer. The retail buyers are saying Price increase? fine, you raise my price... don't send me your product.
"Total cost of goods sold as a percentage of sales for Lifeway Foods was approximately 72% during the third quarter 2007, compared to about 62% during the same period in 2006. The increase was primarily attributable to the cost of milk, Lifeway’s largest cost of goods sold component, which was approximately 110% higher in the third quarter 2007 compared to the same period in 2006. The price of milk in the month of September was the highest ever recorded, and we have since seen the price slightly drop during the month of October, 2007, however, we can make no assurances that the price of milk will continue to decline from its September 2007 record highs. In addition, on July 1, 2007 the minimum wage in Illinois increased to $7.50 per hour from $6.50 per hour, which also had a negative impact our gross margins"
Here is a very good web site to track milk price... Kefir falls under the Class II
http://future.aae.wisc.edu/data/monthly_values/by_area/2?area=US&tab=prices&grid=true
good luck - I simply don't like...
to short companies like LWAY (which is semi-stupid) but then I find myself hoping a good company's stock goes down. Will try to time the bottom and buy more - around 8 huh - wouldn't surprise me in this market and stupid milk prices staying high. They just need to raise prices IMO.
Anybody got guts?
Now I'm not one that believes in these patterns.. but gonna try it... got some in the 10's.... put a trade trigger ($.25) in the high 13's... then gonna short it at 13 with cover in the 9's....
I can also see a hedge funder reading this post and saying .. I'm gonna teach that boy a lesson..... pound it down to 8 right away!
so I trade trigger a short somewhere in there.. LOL
or could just try throwing a dart at the chart.
adding to gfp927z's point....
If you look at last Q, the thinking gotta be forward is not good. a 1% increase in revs and gross profits dive! It appears we go back to 2005 PE at best.
However, I do believe Gross margins improve as price milk price spike was fast and steep.
Hummm? it looks like we've got
a Head and Shoulders Pattern forming...
I think I'm gonna try and pick a few up and place a stop loss right around $14...
wow - what a day...
plan to buy some - just have to pick the bottom now. Chart says way oversold - but.....
Ugly, but the PE is down to 45, so it's getting more reasonable. Where's the bottom? I'm thinking the $8-9 range, but we'll see where it stabilizes.
>>> Lifeway Foods Reports Record 3rd Quarter and Nine Months Ended September 30, 2007 Results
Thursday November 15, 9:00 am ET
- Q3 Sales Up 32%
- Q3 Gross Profit decreases 4% due to record high milk prices
- Total Q3 EPS $.03 in 2007 from $.04 in 2006
MORTON GROVE, Ill., Nov. 15 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc. (Nasdaq: LWAY - News), makers of a nutritious, probiotic dairy beverage called kefir, announced today for the third quarter ended September 30, 2007, total consolidated sales increased 32% to approximately $9,817,500 from $7,456,650 during the same period a year ago. This increase in sales was driven by another strong sales increase of Lifeway's kefir line of 28% and the remainder coming from the sales of the August 3, 2006 Helios kefir line and Pride of Main Street's milk line. The Helios Kefir line, which recorded revenues of $1,183,287 in the third quarter 2007, was a 10% increase from the same period in 2006.
Third quarter 2007 gross profit decreased 4% to $2,720,659 from $2,840,283 during the same period a year ago. This decrease is primarily attributable to the cost of milk, Lifeway's largest cost of goods sold component, which was approximately 110% higher in the third quarter 2007 compared to the same period in 2006. The price of milk in the month of September was the highest ever recorded.
Third quarter pretax income decreased 35% to $782,702 from $1,195,971 during the same period a year ago. Earnings per share decreased to $.03 per share for the third quarter 2007, from $.04 per share for the same three-month period in 2007.
For the nine months ended September 30, 2007, total consolidated sales increased 44% to approximately $28,555,000 from $19,827,000 during the same nine-month period a year ago. This increase in sales was driven by another strong sales increase of Lifeway's kefir line of 29% and the remainder coming from the sales of the Helios kefir line and Pride of Main Street's milk line.
For the nine months ended September 30, 2007 gross profit increased 25% to $10,122,154 from $8,117,482 during the same period a year ago. The cost of milk, Lifeway's largest cost of goods sold component, which was approximately 80% higher in the first nine months of 2007 compared to the same period in 2006. For the nine months ended September 30, 2007 pretax income increased 25% to $4,763,343 from $3,818,809 during the same period a year ago. Earnings per share increased to $.18 per share, up from $.14 per share for the same nine-month period in 2006.
Edward Smolyansky, CFO commented, "We are extremely proud of our third quarter and first 9 months of 2007 results. Despite record high milk and transportation costs, as well as operating in an environment where most of our other production related costs are increasing, we were able to maintain relatively healthy margins. The cost of milk hit a record high in the month of September, and has since dropped slightly in October, a trend we hope but cannot be assured of continues."
Julie Smolyansky, CEO commented, "We have not yet passed these cost increases onto our customers, however if these costs continue to rise, we will have no choice but to raise our prices." Smolyansky added, "Kefir is an extremely unique probiotic health food that adds value well beyond that of regular milk or even yogurt, yet we are still priced much lower than any comparable dairy product."
About Lifeway Foods
Lifeway, recently named Fortune Small Business' 97th Fastest Growing Small Business, and one of only 4 companies to ever be named to the list four straight years in a row, is America's leading supplier of the cultured dairy product known as kefir, and now America's only supplier of Organic Kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these "friendly" cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs (TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding!.
Live conference calls will now be on an annual basis to discuss fiscal full year results. For more information, contact Lifeway Foods, Inc. at (847) 967-1010 or e-mail at info@lifeway.net and visit http://www.lifeway.net.
This news release contains forward-looking statements. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission.
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
For the Three and Nine Months Ended September 30, 2007 and 2006 (Unaudited)
and The Year Ended December 31, 2006
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Sales $9,817,478 $7,456,649 $28,554,984 $19,827,069
Cost of goods sold 7,096,819 4,616,366 18,432,830 11,709,587
Gross Profit 2,720,659 2,840,283 10,122,154 8,117,482
Selling Expenses 1,174,140 890,563 2,856,483 2,323,155
General and
Administrative 965,476 830,400 3,121,851 2,338,483
Total Operating
Expenses 2,139,616 1,720,963 5,978,334 4,661,638
Income from
operations 581,043 1,119,320 4,143,820 3,455,844
Other income (expense):
Interest and
dividend income 84,918 86,318 249,082 294,583
Retail Income 9,731 - 27,912 -
Interest expense (102,197) (96,557) (321,009) (209,983)
Gain (loss) on sale
of marketable
securities, net 208,629 89,260 662,009 277,674
Gain on marketable
securities classified
as trading 578 (2,370) 1,529 691
Total other income
(Expense) 201,659 76,651 619,523 362,965
Income before provision
for income taxes 782,702 1,195,971 4,763,343 3,818,809
Provision for income
taxes 314,508 456,012 1,763,792 1,434,148
Net income $468,194 $739,959 $2,999,551 $2,384,661
Basic and diluted
earnings per common
share 0.03 0.04 0.18 0.14
Weighted average
number of shares
outstanding 16,924,911 16,860,139 16,865,390 16,855,889
--------------------------------------------------------------------------------
Source: Lifeway Foods, Inc. <<<
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