Pyramid Hit by Rising Costs

Pyramid Breweries, hit by rising costs, reported an increased net loss of $1,458,000 in the fourth quarter of 2004, compared to a loss of $962,000 in the same period last year.

The loss came despite strong sales growth with net revenue increasing 27.1% to $10,558,000, but much of this growth came from the infusion of Portland Brewing Company brands, which the company purchased last July. For the fourth quarter of 2004 total beer shipments increased 43.8%, to 40,817 barrels including the addition of the Portland Brewing Company barrelage.

For the year, the company’s net sales increased 15.8%, to $40,084,000 compared to the 12 months ended December 31, 2003. Total shipments for the beverage division for the year increased 15.0%, to 183,210 barrels compared to the same period in 2003.

Net loss for the full year ended December 31, 2004 increased to $2,729,000 compared to a net loss of $1,198,000 for the same period of the prior year.

The company said that increased costs were a result of the underutilized capacity of the Portland, Oregon operations, increased freight and distribution costs driven by high fuel surcharges, continued costs related to the integration of Portland Brewing Company operations and planned increases in selling and marketing expenses.

“We are encouraged by the improving revenue growth driven by increasing sales volumes of our flagship Pyramid Hefeweizen brand alongside the added sales volume related to the acquisition of the assets of the Portland Brewing Company,” said John Lennon, CEO. “However the acquisition also lead to a sharp increase in operating costs in the quarter pending the rationalization of production capacity which was announced on January 27, 2005. The increased costs came at the same time as the company experienced a higher than anticipated decline in sales of the lead MacTarnahan’s brand acquired in the acquisition of Portland Brewing Company assets on July 31, 2004, and this decline in sales also contributed to the erosion of our operating margins.”

In order to improve operating results, Lennon said that the company will concentrate driving sales and revenue growth by focusing efforts on developing its core Pyramid, MacTarnahan’s and Thomas Kemper brands. It will also attempt to eliminate all unnecessary costs from across the business, and seek constant improvement in operating efficiencies.