Horizon Organic Holding Corp., which operates a large dairy farm on Maryland's Eastern Shore and leases the Naval Academy dairy farm in Gambrills, reported a sharp drop in first-quarter earnings yesterday despite a big jump in sales.
Net income for the Boulder, Colo.-based company for the three months that ended March 31 was $307,000, or 3 cents a share. For the corresponding quarter of last year, the company posted a profit of $502,000, equal to 5 cents a share.
Sales rose 60.4 percent to $26.3 million, from $16.4 million.
There was nothing in the numbers that surprised analysts. "They came in right where we expected them," said Arnold Ursaner, an analyst who follows Horizon for CJS Securities Inc. in White Plains, N.Y.
"They seem to be doing everything right," he said. "They had very strong revenue growth and they seem well positioned for future growth."
The company, which is seeking a permit to double the size of its herd at an organic dairy near Kennedyville in Kent County, attributed the decline in earnings to higher distribution and production costs.
Amy Barr, vice president of communication, said production costs rose as a result of the introduction of a new ultra-pasteurized line of organic milk. The process, which conventional retailers demanded, extends the store shelf life of milk from 17 days to between 40 and 60 days.
International sales rose 33 percent during the quarter despite capacity restraints. The company is expanding its Rachel's organic yogurt processing plant in Wales by 60 percent.
Barr said the company wants to add 500 cows to its Eastern Shore dairy farm to bring the herd to 1,000.
She said Horizon is refurbishing the dairy and another building at the Naval Academy farm and expects to be "up and running" there next year.
Horizon's stock closed yesterday at $9.45, unchanged.