Interview: Sysco Corp---Schnieders, Richard---Chief Executive Officer
>> shares of sysco rallied today after the company said first-quarter profit rose over 8%.that’s sysco, the food distributor. north america’s largest food distributor is limiting the effects of higher gasoline, meat and dairy costs by automating distribution centers and cutting jobs. net income increased to 25 cents a share. sales rose 5.6%. that’s the smallest gain in over two years. for more on the company’s earnings and outlook, we bring in chief executive richard schneiders, standing by in houston, texas. thank you for joining us, sir. i’d like to start with your strategy. it has been something we’ve seen from a lot of companies, that they’re trying to increase efficiency and decrease the number of people they have to pay to get the job done. how have you gone about that? is this something you foresee continuing for sysco into the future?
>> michael, our strategy really is to continue to work with our customers to help them grow their business. those thousands of restaurants across the u.s. to understand better which customers are more important to sysco and allows us to be more strategic in the way we allocate resources. that’s a successful strategy for us and we’re getting closer to our customers.
>> what about capital spending% -and what you put out on your side of the company? are you going to be growing more, spending more? hopefully you’re growing more, but spending more to do so, or can you do it with your current resources?
>> from a capital standpoint, we continue to invest in our business. we invested just short of $100 million this quarter. we anticipate our capital expenditures this year will be between $400 and $450 million, which is on par for what we normally do. so no matter what the general economic environment is, we continue to invest in the industry.
>> speaking of the general economic environment, you certainly has to worry about commodity costs. what’s your outlook there for the coming quarter, into 2005? >> we hope to see a moderation. the fourth quarter of our last fiscal year ending in june, we had 8% inflation, which was historic highs. this year we―this first quarter of our year, we announced inflation of just over 5%. we’ve seen moderation in inflation and we anticipate it will moderate more. beef prices are still high and will remain high for a while because of the time to replace the herds but we’ll not see as high inflation as we’ve seen in the last few months.
>> what about energy prices, with your plants and your trucks distributing your goods?
>> in terms of our transportation, we have about 9,000 trucks on the road every day and our operating companies have done a great job routing and filling the trucks. our impact to the cost of fuel for us is fairly minimal. however, where fuel costs are having an impact is in terms of the discretionary spending for the consumer and their reluctance to eat out as often as they once would. as oil prices any down, we’ll see that activity pick up.
>> are your customers telling you they’re needing to order less because of the fuel effect?
>> we’re getting the same products from our customers, but they’re not ordering quite as many. where last year they might have ordered 10 cases of french fries, this year it’s eight cases of french fries. as things come back, sysco is well positioned for the future and as the economic environment improves, we’ll be positioned very well for the future.
>> you’ve been very acquisitive. are you looking to buy into 2005?
>> we have been an acquisitive company. over the 34-year history of the company, we’ve done just short of 100 acquisitions. i’m proud to say we’ve never had a writedown.we continue to look at acquisition opportunities in our core business and our specialty meat and produce companies. so absolutely, we continue to look for acquisitions.
>> is this a good market to do that? or is it better to wait until the economy firms up a little bit?
>> well, we think any time is a good time to talk with potential partners who might be interested in becoming part of the sysco family. right now is actually a pretty good time for us to have those discussions.
>> let me tie this together with something i asked you earlier about the economic climate. interest rates are fairly low but starting to go higher. did you want to move on anything or invest capital any time soon to take advantage of that?
>> well, as i said, in terms of our capital expenditure and acquisitions, it’s an ongoing process so we’d love to take more advantage of lower interest rates but we’ll have do the right thing at the right time and as i suggested, we’re working on a number of initiatives right now both internally and from an acquisition perspective, also.
>> thank you very much. sysco chief executive, richard schneiders. peoplesoft directors will meet to review the latest offer from oracle. $24 a share. is this the end of the fight for the company? is that story up next.
