Campbell Reports 10 Percent Increase in Sales
Campbell Soup Company has reported its results for the second quarter of fiscal 2013. Net earnings for the quarter ended Jan. 27, 2013, were $190 million, or $0.60 per share, compared with $205 million, or $0.64 per share, in the prior year.
18 Feb 2013 --- The current and prior years’ reported net earnings included charges associated with restructuring programs. Excluding restructuring and restructuring-related charges, adjusted net earnings increased 6 percent to $220 million, compared with $207 million in the prior year’s quarter, and adjusted net earnings per share increased 9 percent to $0.70 compared with $0.64 in the year-ago quarter. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.
Denise Morrison, Campbell’s President and Chief Executive Officer, said, “We are pleased with our performance in the quarter. “Within U.S. Simple Meals, we saw growth in U.S. Soup as consumers responded to our efforts in brand building and innovation, both in our core business and in new products. While we reduced overall advertising spending, we were able to maintain competitive levels and to increase advertising support for new innovation. Our work to improve taste adventure and deliver more effective and efficient marketing and promotion resulted in increased consumption in this important business.”
Morrison continued, “Our Global Baking and Snacking business has benefitted from innovation in both core brands and new products, plus increased distribution and merchandising. Gains in snack crackers, cookies and fresh bakery products drove sales and earnings at Pepperidge Farm. Arnott’s sales increased with solid performance in Australia and Indonesia.
“Our newly acquired Bolthouse Farms business delivered solid results in the fresh carrots, beverages and salad dressings categories, driven by innovation and increased distribution. The Bolthouse Farms integration is also progressing well.”
Morrison concluded, “Despite weakness in our U.S. Beverages and North America Foodservice businesses, our first half business results were positive. Although profits in U.S. Beverages improved, we have more work to do to drive the top line and continue to stabilize profit in a sluggish shelf-stable juice category. Halfway through our fiscal year, we are making progress against our plans to return Campbell to sustainable, profitable net sales growth.”
The company confirmed its previous fiscal 2013 guidance. Campbell expects to grow sales between 10 and 12 percent, adjusted EBIT between 4 and 6 percent and adjusted EPS between 3 and 5 percent. The company expects adjusted EPS to be between $2.51 and $2.57. This guidance includes the estimated impact of the Bolthouse Farms business and excludes the impact of acquisition transaction costs and restructuring charges. In fiscal 2013, Campbell expects Bolthouse Farms to contribute approximately $750 million to sales and add $0.05 to $0.07 to adjusted EPS, including the impact of the suspension of Campbell’s strategic share repurchase program.
On Feb. 14, 2013, Campbell announced that it has entered into commercial arrangements with Grupo Jumex and Conservas La Costeña that will expand the company’s access to manufacturing and distribution capabilities in Mexico. These providers will produce and distribute Campbell’s beverages, soups, broths and sauces throughout the Mexican market. As a result of these agreements, Campbell will close its plant in Villagrán, Mexico, and eliminate approximately 260 positions. In the second quarter of fiscal 2013, Campbell recorded a restructuring charge of $6 million ($4 million after tax or $0.01 per share) related to this initiative.
Gross margin was 35.1 percent compared with 38.4 percent a year ago. Excluding restructuring-related charges, adjusted gross margin in the current quarter was 36.8 percent. The decline in gross margin was mostly attributable to the acquisition of Bolthouse Farms, which operates with a lower gross margin structure.
Marketing and selling expenses were $297 million, comparable to the prior year. Lower advertising and consumer promotion expenses, primarily in the U.S. Soup business, were offset by higher spending to support the company’s innovation efforts, higher selling expenses and the impact of the addition of Bolthouse Farms expenses.
Administrative expenses increased $20 million to $172 million, primarily due to the acquisition of Bolthouse Farms, as well as higher compensation and benefit costs, including pension expenses.
EBIT was $301 million compared with $329 million in the prior-year quarter. Excluding restructuring and restructuring-related charges, adjusted EBIT increased 5 percent to $349 million. Excluding Bolthouse Farms’ operating results, adjusted EBIT increased 1 percent, primarily driven by lower marketing expenses, partly offset by higher selling expenses and R&D costs.
Net interest expenses increased $5 million to $31 million, reflecting a higher debt level due to the acquisition of Bolthouse Farms, partially offset by lower interest rates.
The tax rate in the quarter was 30.7 percent compared with 33.7 percent in the prior year. Excluding restructuring and restructuring-related charges, the current quarter’s adjusted tax rate was 31.8 percent. The decrease was primarily due to lower taxes on foreign earnings in the current year.
Adjusted net earnings for the quarter increased 6 percent to $220 million. Adjusted net earnings per share were $0.70 in the current quarter compared with net earnings per share of $0.64 in the prior-year quarter, an increase of 9 percent. Earnings per share benefitted from fewer shares outstanding, reflecting the impact of the company’s share repurchase program in the prior year.
