Lancaster Colony Reports Q1-2019 Sales And Earnings

Westerville / OH. (lc) Lancaster Colony Corporation reported results for the company’s fiscal first quarter ended September 30, 2018. Highlights for the quarter are as follows:

  • Consolidated net sales increased 5.9 percent to a first quarter record USD 316.7 million versus USD 298.9 million last year.
  • Retail net sales grew 0.4 percent to USD 162.7 million as the impact of price increases taken in response to higher freight and commodity costs and continued volume gains for shelf-stable dressings and sauces sold under license agreements helped drive improvement. The Retail net sales results also reflect a reduced level of trade spending and coupon expenses compared to the prior year. Note that organic sales growth in the prior-year quarter was a relatively strong 4.0 percent and included some benefit from the timing of seasonal shipments of caramel dips and frozen dinner rolls that did not recur this year.
  • Foodservice net sales advanced a strong 12.5 percent to USD 153.9 million as the segment benefited from a number of factors including: higher sales volumes from existing business; additional sales from new business; incremental sales resulting from temporary supply and service issues experienced by some of our foodservice competitors; pricing actions we implemented beginning in January to help offset higher freight and commodity costs; and a comparison to a relatively weak prior-year quarter with a reported sales decline of 1.4 percent. Limited-time-offer program sales to our national chain restaurant accounts were slightly below last year’s level.
  • Consolidated gross profit grew USD 5.7 million or 7.6 percent to USD 81.2 million as the increased sales volumes, pricing actions, lower trade spending and coupon expenses, continued cost savings from our lean six sigma program and improved operating efficiencies more than offset higher freight and commodity costs.
  • Selling, general and administrative expenses held nearly even at USD 32.1 million compared to last year’s USD 31.3 millionas reduced spending for digital advertising and lower brokerage costs were offset by incremental investments in salaried personnel to support our continued growth.
  • Consolidated operating income increased 11.2 percent to USD 49.1 million from USD 44.2 million in the prior year driven by the gross profit improvement. Consolidated operating margin improved 70 basis points to 15.5 percent as influenced by the factors referenced above. Retail segment operating margin improved from 20.3 percent to 20.9 percent while Foodservice segment operating margin increased from 10.7 percent to 12.3 percent.
  • Net income was USD 39.0 million, or USD 1.42 per diluted share, compared to USD 29.4 million, or USD 1.07 per diluted share, last year. Note that the lower tax rate of 22.6 percent in the current year compared to the prior-year rate of 34.2 percent primarily reflects the favorable impact of the Tax Cuts and Jobs Act of 2017.
  • The regular quarterly cash dividend was continued at the higher level of USD .60 per share set in November 2017. The company’s balance sheet remained debt free on September 30, 2018 with USD 218 million in cash and equivalents.

CEO David A. Ciesinski commented, «We were very pleased with the strong sales growth in our Foodservice segment that led to a record level of consolidated net sales in the fiscal first quarter. In addition, the demonstrated improvement in both gross margin and operating margin for the quarter is the result of our continued efforts to offset inflationary freight and commodity costs through pricing actions and better-optimized investments in retail promotions, marketing and advertising in addition to the success of our lean six sigma program.

Looking ahead to our fiscal second quarter, historically our biggest sales quarter of the year, we expect higher freight costs to persist while commodity costs should turn closer to neutral as we begin to lap some of the notable increases we experienced last year, particularly egg costs. As announced earlier this week, we are excited to have added Bantam Bagels to Lancaster Colony’s family of companies. We look forward to working with the founders of Bantam Bagels, Nick and Elyse Oleksak, and growing the business through the remainder of this fiscal year and beyond».

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