Conagra Reports Decline in Profits05 April 2013
US - ConAgra Foods, one of North America’s leading packaged food companies, has reported sales in the Consumer Foods segment of $2,303 million and operating profit of $284 million for the third quarter.
Sales increased by seven per cent, reflecting seven per cent contribution from acquisitions, three per cent favourable price mix, and a three per cent organic volume decline.
Sequentially, organic volume improved the company reports.
Brands posting sales growth for the quarter include Hebrew National, Hunt’s, Lightlife, Marie Callender’s, PAM, Peter Pan, Rosarita, Ro*Tel, Slim Jim, Swiss Miss, Wesson, and others.
Operating profit of $284 million declined from $331 million a year ago.
After adjusting for $5 million of net expense in the current period, and $51 million of net benefit in the year-ago period, from items impacting comparability, current-quarter operating profit of $289 million increased by three per cent over $280 million year on year.
Marketing investment for the base business (excluding recently completed acquisitions) increased approximately 33 per cent, reflecting the company’s planned commitment to building long-term brand strength and the flexibility afforded by improved margins.
The company said that operating profit growth reflects a combination of favourable price mix and other margin management initiatives, a more favourable input cost environment, and contribution from acquisitions.
Sales for the Commercial Foods segment were $1,256 million, one per cent above year-ago period amounts. Segment operating profit was $167 million, 11 per cent above last year.
After adjusting for $10 million of net expense from items impacting comparability, comparable year-over-year profit growth was 18 per cent.
The milling operations posted a strong profit increase due to favorable market conditions, good volumes, mix improvement, and excellent productivity. To a lesser extent, Lamb Weston potato operations also contributed to segment profit growth, as the benefit of price/mix more than offset the impact of a volume decline primarily resulting from softness in key Asian markets.
The recently acquired Ralcorp businesses contributed a total of $292 million in sales and $5 million of operating profit in the fiscal third quarter.
After adjusting for $17 million of net expense from items impacting comparability, operating profit was $22 million. The company currently reports Ralcorp results within two new segments: Ralcorp Food Group and Ralcorp Frozen Bakery Products, listed as such in the segment detail later in this document.
The company continues to expect accretion from the Ralcorp acquisition to be approximately $0.05 per diluted share this fiscal year, excluding items impacting comparability.
Based on the strong performance to date and the expected contribution from Ralcorp, the Conagra said it expects the 2013 diluted EPS to be approximately $2.15, adjusted for items impacting comparability; this represents approximately 17 per cent year-over-year growth.
Gary Rodkin, ConAgra Foods’ chief executive officer, said: “We are pleased with the earlier-than-planned closing of the Ralcorp transaction, sequential improvement in our Consumer Foods volumes, comparable profit growth in both of our core business segments, and the announcement of Ardent Mills, a new proposed joint venture for our milling operations.
"Challenges remain for key areas of our business, but a combination of successful margin improvement initiatives and a more favorable input cost environment is enabling us to significantly increase our brand investment and deliver EPS growth.”
He added: “Our organisation is very focused on the ongoing integration of Ralcorp, which will play a key role in creating shareholder value. We reaffirm our expected comparable EPS benefit of $0.05 in fiscal 2013 results and $0.25 in fiscal 2014 results, and are very excited about our earnings potential over the next few years. This is a great time to be a part of ConAgra Foods.”
Diluted EPS from continuing operations was $0.29 in the fiscal third quarter, down from $0.67 earned in the year-ago period. Excluding $0.26 per diluted share of net expense in the current quarter, and $0.14 of net benefit in the year-ago period, from items impacting comparability, current quarter EPS of $0.55 was four per cent above the comparable $0.53 earned in the year-ago period.
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