Chris,
I've played IPSUW for small bounces for two years now. I once thought it was a clear no brainer but no long do. Because IPSU processes sugar their profit margins are at the expense of the rising cost of sugar cane and energy. They also are seeing sugar prices drop because of low hurricane activity which drove the prices over the last several years. I haven't looked at sugar prices lately. I haven't found a stock to use as a proxy for sugar as a commodity. Any suggestions, I'm all ears.
From the most recent July financials:
For the quarter ended June 30, 2007, net sales decreased 6.5% to $216.4 million, compared to $231.3 million in the same quarter of the prior year, as a result of lower sales prices on a small increase (0.6%) in volumes. Domestic sugar prices decreased 10.3% from high price levels experienced last year due to hurricane disruptions of competitors' operations in Louisiana and Florida in the fall of 2005. In addition, as previously reported, a historically high beet crop has increased pressure on volumes and price, particularly in the industrial and foodservice channels.
Lower domestic raw sugar prices and lower natural gas costs offset in part the effect of lower sugar prices. The resulting gross margin as a percentage of sales decreased to 10.3% for the third quarter compared to 15.4% in the prior year quarter.
Robert A. Peiser, Imperial Sugar's president and ceo, commented: "Our third fiscal quarter results remain at an acceptable level in the face of current domestic supply conditions. We are pleased to have been able to sustain margins and operating profits at above average levels in spite of weaker market pricing, aided in part by lower raw sugar and energy costs.
"Fiscal 2008 is shaping up to be a challenging year in the domestic sugar market. However, we have seen these cycles before and are well positioned to work through it while continuing to make investments in the Company which are expected to improve future performance." |
