ConAgra to offload seafood and cheese businesses
The company said that it expected to take charges to earnings during the remainder of fiscal 2006 and in future quarters relating to planned divestitures and restructuring activities.
17/03/06 ConAgra Foods Inc. has announced actions designed to improve long-term operating performance. The company expects increased annual marketing spending of more than $75 million, in combination with the reallocation and disciplined application of current marketing dollars, to result in major increases for key consumer brands. The company also expects strong contribution to its future earnings from the impact of plant rationalization, supply chain improvements, the application of divestiture proceeds and reductions in the company's administrative costs, including significant costs currently absorbed by businesses to be divested.
The company said that it expected to take charges to earnings during the remainder of fiscal 2006 and in future quarters relating to planned divestitures and restructuring activities. A portion of the charges will be non-cash impairment charges incurred to adjust the carrying values of certain assets held for divestiture, including the majority of the company's refrigerated meat businesses. The balance will reflect anticipated cash and non-cash costs relating to the implementation of restructuring activities, including programs designed to reduce the company's ongoing operating costs. The amount of charges for the third quarter will be announced in connection with the company's next earnings release. The company also expects certain divestitures to result in gains, which will be recorded in future periods as appropriate. The company also announced plans to divest its seafood and domestic and imported cheese businesses.
This follows the company's February announcement that it would divest most of its refrigerated meats operations. It has already announced definitive agreements for the divestiture of its Louis Kemp seafood and Cook's Ham businesses. Aggregate annual revenue of the meat, seafood and cheese businesses to be divested is approximately $2.8 billion.
"It is essential that we increase our investments behind our highest potential brands, simplify our portfolio of businesses and build a high quality earnings trajectory for ConAgra Foods," said Gary Rodkin, President and Chief Executive Officer. "The planned divestitures are the catalyst for our ability to attack costs, streamline our operations and return quickly to recent earnings levels, but with a significantly stronger foundation for future performance."
Although the company expects to return to current earnings levels during fiscal 2009, the cost of implementing the actions and the impact of planned divestitures are expected to depress operating earnings until that time.
The Company expects fiscal year 2007 earnings in the range of $1.10-$1.15 per share, excluding items that impact comparability, and also confirmed that its internal plans are for year-over-year earnings per share growth in the second half of fiscal 2006, excluding items that impact comparability. Dividend Action. The board of directors of the company declared a quarterly dividend of 18 cents per share payable on June 1, 2006 to shareholders of record as of May 1, 2006. The dividend continues to represent one of the highest payout levels among consumer food companies, but is 9.25 cents per share lower than the company's most recent quarterly dividend.
