ConAgra Profits Up in Q1, But Lowers Outlook
The company has slightly lowered its fiscal 2009 outlook; the company now expects fiscal 2009 diluted EPS from continuing operations to be slightly above $1.50, excluding items impacting comparability.
19/09/08 ConAgra Foods, Inc., has reported results for the fiscal 2009 first quarter ended Aug. 24, 2008. Overall sales grew 17%, including 9% sales growth from the Consumer Foods segment, reflecting the company's recent pricing actions. Prior-year diluted EPS from continuing operations of $0.27 included net $0.01 of income from items impacting comparability.
Based on a combination of volume and inflation expectations as well as increased investments for some brands and categories, the company has slightly lowered its fiscal 2009 outlook; the company now expects fiscal 2009 diluted EPS from continuing operations to be slightly above $1.50, excluding items impacting comparability.
Gary Rodkin, ConAgra Foods' chief executive officer, commented, "We are pleased with the overall sales results in the Consumer Foods segment, the continued profit growth in Commercial Foods, and progress with overall supply chain and SG&A costs. We are disappointed that Consumer Foods posted a decline in comparable operating profit; however, we have already implemented actions that should generate stronger profits for the Consumer Foods business, particularly in the second half of the fiscal year."
Segment Changes: In the first quarter of fiscal 2009, the International Foods segment was merged into the Consumer Foods segment. The company has also changed the name of its Food & Ingredients segment to Commercial Foods. A presentation of quarterly segment sales and operating profits for fiscal year 2008 can be found in the Q&A document accompanying this release.
The Consumer Foods segment posted sales of $1.9 billion and operating profit of $187 million for the quarter. The following segment commentary relates to comparable performance unless otherwise indicated:
Consumer Foods' comparable sales growth was 9%, most of which was due to net price increases. Approximately one point of the sales growth reflects having sales of Peter Pan peanut butter and Alexia Foods for the entire first quarter this fiscal year and only part of the first quarter last fiscal year. The company implemented a 7% weighted average price increase for this segment on March 24, 2008, and implemented an additional 3% weighted average price increase at the end of the first quarter of fiscal 2009. Volumes were essentially flat.
Operating profit of $187 million was essentially equal to year-ago amounts as reported, and declined 6% on a comparable basis as detailed on page 10. Advertising and promotion expense increased at a mid single-digit rate. Although the company continued to successfully implement pricing actions and cost-saving initiatives, these were more than offset by significant input cost inflation, particularly in cooking oils, tablespreads, and Banquet frozen foods. Overall inflation was greater than $190 million. Due to a combination of recent price increases, innovation, an expected moderation of input cost increases, as well as the achievement of supply chain and SG&A cost savings, the company expects the segment to post strong operating profit growth for the full fiscal year despite potential negative volume impact from price increases. The company expects the improvement to be concentrated in the second half of the fiscal year.
During the quarter, sales for the Commercial Foods segment were $1.2 billion, 32% ahead of last year, as all major operations posted sales growth. Sales for the milling operations increased due to the pass-through of higher wheat costs as well as improved product mix. Sales for Lamb Weston specialty potato and appetizer operations grew primarily due to increased prices and the acquisition of Watts Brothers Farms; this recent acquisition contributed approximately 2 points of sales growth to the overall segment this quarter. Sales for Gilroy Foods & Flavors showed solid sales growth, driven by volume growth across major product lines and new customer business with foodservice and industrial accounts. Segment operating profit was $133 million for the quarter, 10% ahead of the year-ago amount, with all major operations posting growth due to strong sales results and a focus on efficiencies. Segment operating profit includes an approximate $5 million gain from an asset sale within Gilroy Foods & Flavors. Excluding this gain, segment operating profit was approximately $127 million (rounded) for the quarter, above year-ago amounts.
