Consumer and Commercial Food Sectors Hit ConAgra Results24 March 2014
US - Meat and Food processing giant ConAgra Foods saw Consumer Foods sales fall in line with expectations, and comparable operating profit flat over the third quarter of the year.
The company said that challenges for a few key brands are weighing on overall segment sales results.
Strong productivity, lower marketing expense, and other cost reductions benefited segment profits.
Commercial Foods also posted a slight decline in sales and a decrease in operating profit, as expected.
The decrease in profit was due to customer transition and crop quality issues in the Lamb Weston potato products business.
However, Private Brands sales and comparable operating profit increased substantially, although below original expectations, as prior year results included only 27 days of contribution from Ralcorp because of the date of that acquisition.
Diluted EPS from continuing operations was $0.58 as reported for the fiscal third quarter vs.$0.28 in the year-ago period. After adjusting for items impacting comparability, current-quarter diluted EPS of $0.62 was 13 per cent above the comparable $0.55 earned in the same period a year ago.
Gary Rodkin, ConAgra Foods’ chief executive officer, said: “We are on track with our EPS projections for the second half of this fiscal year.
“As we have previously discussed, there are operating challenges that have impacted segment performance and overall EPS growth, but we are encouraged by some pockets of strength.
“This quarter we posted good sales and market share performances for some of our consumer brands, good international growth for our potato operations, and continued improvement in the operations and organization for our private brands.
“The synergies expected from the former Ralcorp businesses are coming in slightly ahead of plans, and we continue to make good progress on SG&A efficiency initiatives. We reaffirm our full year fiscal 2014 EPS guidance, and remain confident in our long-term strategy and outlook.”
Consumer Foods Segment
The Consumer Foods segment posted sales of approximately $1.9 billion and operating profit of $266 million, as reported. Sales declined, as expected, reflecting a three per cent volume decrease and flat price/mix. The impact of foreign exchange negatively impacted segment sales by one per cent.
Operating profit of $266 million was one per cent above those of a year ago.
After adjustments, the current quarter operating profit of $270 million was in line with comparable amounts a year ago.
Commercial Foods Segment
Sales for the Commercial Foods segment were $1.5 billion, down slightly compared with $1.5 billion a year ago.
Current-quarter sales include some benefit from acquisitions, specifically legacy Ralcorp foodservice results, which had only 27 days of contribution last year because of the date of the acquisition.
Segment operating profit was $163 million, 12 per cent below last year.
After adjustments, comparable current-quarter operating profit of $180 million fell by eight per cent compared to $196 million a year ago.
Sales for the Private Brands segment were $1.1 billion in the quarter, up more than $600 million over last year.
This increase reflects the acquisition of the Ralcorp businesses; sales from most of the former Ralcorp businesses are reported within this segment.
Operating profit for this segment was $45 million and $66 million adjusted for items impacting comparability; the increase over last year reflects the acquisition.
The company said it continues to expect fiscal 2014 diluted EPS, adjusted for items impacting comparability, to be in the range of $2.22-$2.25.
The company continues to expect operating cash flow of approximately $1.4 billion in fiscal 2014, and to repay approximately $550 million of debt before the end of the fiscal year.
After repaying approximately $550 million of debt in fiscal 2014, this will amount to slightly more than $950 million of cumulative net debt repayment since the acquisition of Ralcorp.
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