Milling & Baking News - September 25, 2007 - (Page 1)

THE NEWS WEEKLY OF GRAIN-BASED FOODS SEPTEMBER 25, 2007 / FEATURE I.B.C. viability increasingly in doubt after labor talks collapse Balancing needs Seeking trans-fat-free alternatives that perform like 'hard' fats, formulators must weigh saturated content against desired finished product characteristics. Story on Page 27 LATE NEWS Johanns resigns, Conner to take over as acting secretary WASHINGTON - Secretary of Agriculture Mike Johanns resigned his post last week, a move that opens the door for him to return home to Nebraska and potentially run for the U.S. Senate. Sworn in as the 28th Secretary of Agriculture on Jan. 21, 2005, Mr. Johanns was born in Iowa as the son of a dairy farmer and went on to serve as Nebraska's 38th governor before coming to his post at the U.S.D.A. "He brought focus and energy to the department," President Bush said. "He was a champion of Continued on Page 8 KANSAS CITY - The prospect that Interstate Bakeries Corp. will not emerge intact from bankruptcy grew more likely last week as the company's share price plunged toward worthlessness. Following a week of breakdowns in union talks and the introduction of contingency plans for liquidation, the market value of Kansas Citybased I.B.C. sunk as low as $16 million, or a share price at 35c, down 93% from the 52-week high and down 77% from a share price of $1.50 as recently as Aug. 17. At its peak after its September 2004 bankruptcy filing, Interstate's market value was $455 million. The decline suggested it was increasingly unlikely equity holders would receive any value from their I.B.C. holdings and also increasingly raised questions about whether debt- holders would "come out whole." The precipitous fall of the nation's largest wholesale baker coincides with the company's three-year anniversary since filing for bankruptcy in September 2004. Now, the company finds itself considering selling off its assets. Things have not always looked so bleak for I.B.C. in the past three years. Despite acknowledging the difficulties associated with climbing out of bankruptcy, the company appeared optimistic it would be able to do just that. Tony Alvarez II, who on Sept. 22, 2004, was named chief executive officer of I.B.C., was among those who felt the circumstances at I.B.C. were not too dire. With extensive experience at the helm of troubled companies, Mr. Alvarez said at Continued on Page 12 Milling experiences high interest costs even as Fed lowers rate KANSAS CITY - While dramatically higher wheat prices stand as the principal contributor to rapidly escalating bakery flour costs, another force having an unprecedented impact on the flour business is surging interest expense. Last week's stimulative cut by the Federal Reserve Board in the federal funds rate (to 4.75% from 5.25%), followed by cuts in the banks' prime lending rate (to 7.75% from 8.25%) offered some relief. Yet interest paid on wheat inventories valued at $8 a bu was dramatically higher for milling companies than in the past. At their peaks, wheat prices were more than double levels prevailing a year ago and more than triple the decade's low of just over $2.50 a bu. "The impact has been amazing," said Paul Maass, president and general manager, ConAgra Mills, part of ConAgra Foods, Inc., Omaha. "In just this quarter versus last quarter, the wheat price has required a tremendous increase in working capital for the flour milling business." On the income sheet, Mr. Maass said the higher wheat prices have a significant impact on the net sales line offset by Continued on Page 10

Table of Contents for the Digital Edition of Milling & Baking News - September 25, 2007


Milling & Baking News - September 25, 2007