Chicago - Meatpacking and livestock industry experts have speculated in recent weeks about the future of ConAgra Inc's poor-performing fresh meat division but analysts see no major changes coming any time soon.
Industry speculation has had ConAgra selling all or parts of the fresh meat division, or installing new management, or waiting until revenues improve and then selling it.
"Even if they want to cut it loose, they may decide it makes more sense to first improve the business," said Nomi Ghez, Goldman Sachs analyst. "I'm not sure how many potential buyers there are for a business like that."
On February 13, ConAgra president Bruce Rohde blamed the fresh meat and poultry sector for a downgrade in the giant food processor's 1998 earnings projections. Rohde said the sector was performing "far below" expectations due to reduced exports to Asia while U.S. meat and poultry production is high.
The company said it expected earnings in the second half of fiscal 1998, which ends May 31, to be even with or below the previous year. Also, it said fiscal year 1998 earnings will not meet the double-digit growth that had been forecast in December.
On Friday, ConAgra's shares closed up 3/8 at $30 3/8.
The fresh meats division accounts for about 10 percent of ConAgra's earnings. Rohde did not elaborate on plans for the division and a ConAgra spokesman also declined to comment on the industry speculation that a major change was being considered.
"It would not surprise me at all that some of those operations are cut loose," said George Dahlman, research analyst with Piper Jaffrey.
A day before Rohde's announcement, ConAgra had announced that Kevin LaFleur, president of the company's Monfort Beef and Lamb Co, had been replaced by Tom Manuel and a new management team.
The fresh meat division includes Monfort Beef and Lamb Co, Swift and Co, and ConAgra Poultry Co.
"Historically, ConAgra used to do what it's doing now, change management and wait for the business to improve," said Ghez. "But there is growing pressure from shareholders to address this business because this business is clearly not performing well."
"Their mindset is to fix it, not to sell it," said John McMillin, food industry analyst with Prudential Securities.
But McMillin said unless the fresh meat division improves, he expects more management changes in 12 to 18 months.
ConAgra has tried to raise revenue in its fresh meats sector to levels seen at other of its units, but Dahlman said company executives may now realize that's not going to occur.
Also, with narrow profit margins the norm in the fresh meat industry, analysts said it may be difficult to find a buyer.
According to one source, market rumors surfaced last month that ConAgra's beef plants would be sold off individually. The source said the Garden City, Kan., plant might be sold and converted to pork processing, with other beef companies named as possible buyers of Conagra's Nebraska and Texas plants.
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