B+G Foods: Reports Q1-2023 Financial Results

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the first quarter of 2023. Commenting on the results, President and Chief Executive Officer Casey Keller: «First quarter results demonstrated continued pricing recovery against inflationary costs, with both adjusted gross margin and adjusted Ebitda margin significantly above the first quarter of last year. Base business net sales (which excludes net sales from the recently divested Back to Nature brand) were slightly below last year’s elevated demand from Omicron partial lockdowns, but up 3.8 percent on a two-year comparison from the first quarter of 2021. We have largely executed pricing actions to cover current inflation, and are starting to realize some reductions in key soybean and other commodities.»

Financial Results for the First Quarter of 2023

Net sales for the first quarter of 2023 decreased USD 20.6 million, or 3.9 percent, to USD 511.8 million from USD 532.4 million for the first quarter of 2022. The decrease was primarily attributable to the Back to Nature divestiture, partially offset by the Yuma acquisition. Net sales of Back to Nature, which the Company divested on January 3, 2023, and therefore not part of the Company’s fiscal 2023 results, were USD 14.4 million during the first quarter of 2022. Net sales from the Yuma acquisition, which was completed on May 5, 2022 and therefore not part of the Company’s first quarter of 2022 results, contributed USD 0.4 million to the Company’s net sales for the first quarter of 2023.

Base business net sales for the first quarter of 2023 decreased USD 6.4 million, or 1.2 percent, to USD 511.4 million from USD 517.8 million for the first quarter of 2022. The decrease in base business net sales was driven by a decrease in unit volume of USD 67.5 million and the negative impact of foreign currency of USD 2.1 million, largely offset by increases in net pricing and the impact of product mix of USD 63.2 million, or 12.2 percent of base business net sales.

Net sales of the Company’s spices + seasonings increased USD 8.4 million, or 9.6 percent; net sales of Clabber Girl increased USD 6.5 million, or 31.0 percent; and net sales of Maple Grove Farms increased USD 0.6 million, or 2.7 percent, in the first quarter of 2023 as compared to the first quarter of 2022. Net sales of Green Giant (including Le Sueur) decreased USD 9.9 million, or 7.3 percent; net sales of Crisco decreased USD 6.7 million, or 8.4 percent; net sales of Ortega decreased USD 4.2 million, or 9.7 percent; and net sales of Cream of Wheat decreased USD 0.4 million, or 1.7 percent, in the first quarter of 2023, as compared to the first quarter of 2022. Base business net sales of all other brands in the aggregate decreased USD 0.7 million, or 0.8 percent, for the first quarter of 2023, as compared to the first quarter of 2022.

Gross profit was USD 114.2 million for the first quarter of 2023, or 22.3 percent of net sales. Excluding the negative impact of USD 0.7 million of acquisition/divestiture-related expenses and non-recurring expenses included in cost of goods sold during the first quarter of 2023, the Company’s gross profit would have been USD 114.9 million, or 22.4 percent of net sales. Gross profit was USD 101.3 million for the first quarter of 2022, or 19.0 percent of net sales. Excluding the negative impact of USD 2.1 million of acquisition/divestiture-related expenses and non-recurring expenses included in cost of goods sold during the first quarter of 2022, the Company’s gross profit would have been USD 103.4 million, or 19.4 percent.

During fiscal 2022, the Company’s gross profit was negatively impacted by higher than expected input cost inflation, including materially increased costs for raw materials and transportation. The Company expects input cost inflation will continue to have a significant industry-wide impact during the remainder of fiscal 2023. The Company has been attempting to mitigate the impact of inflation on its gross profit by locking in prices through short-term supply contracts and advance commodities purchase agreements and by implementing cost saving measures. The Company also announced several rounds of list price increases in 2021, 2022 and during the first quarter of 2023. However, the effective date of increases in the prices the Company charges its customers generally lag behind rising input costs. As such, the Company did not fully offset the incremental costs that it faced in fiscal 2022. However, during the fourth quarter of 2022, the Company began to more fully realize the benefits of previously announced list price increases. This trend continued during the first quarter of 2023, with the impact of previously announced list price increases the primary driver of a recovery in gross profit, which as described above, increased during the first quarter of 2023 as compared to the first quarter of 2022.

Selling, general and administrative expenses decreased USD 0.1 million, or 0.2 percent, to USD 46.7 million for the first quarter of 2023 from USD 46.8 million for the first quarter of 2022. The decrease was composed of decreases in warehousing expenses of USD 1.7 million, selling expenses of USD 1.1 million and consumer marketing expenses of USD 0.1 million, largely offset by increases in general and administrative expenses of USD 2.3 million and acquisition/divestiture-related and non-recurring expenses of USD 0.5 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 0.3 percentage points to 9.1 percent for the first quarter of 2023, as compared to 8.8 percent for the first quarter of 2022.

Net interest expense increased USD 12.6 million, or 47.1 percent, to USD 39.4 million for the first quarter of 2023 from USD 26.8 million for the first quarter of 2022. The increase was primarily attributable to higher interest rates on the Company’s variable rate borrowings, as well as the accelerated amortization of deferred debt financing costs relating to the prepayments described below, partially offset by a reduction in average long-term debt outstanding. The reduction in average long-term debt outstanding in the first quarter of 2023 as compared to the first quarter of 2022 resulted primarily from the Company’s use of USD 50.0 million of the gross proceeds of the Back to Nature divestiture and an additional USD 71.0 million of cash on hand to make aggregate prepayments of USD 121.0 million principal amount of term loans during the first quarter of 2023, partially offset by an increase in average revolver borrowings outstanding of approximately USD 77.7 million.

The Company’s net income was USD 3.4 million, or USD 0.05 per diluted share, for the first quarter of 2023, compared to net income of USD 23.7 million, or USD 0.34 per diluted share, for the first quarter of 2022. Net income and diluted earnings per share for the first quarter of 2023 were negatively impacted by the net negative impact on income tax expense of USD 14.7 million, or USD 0.21 per share, resulting from the Back to Nature divestiture. The Company’s adjusted net income for the first quarter of 2023 was USD 19.1 million, or USD 0.27 per adjusted diluted share, compared to adjusted net income of USD 19.9 million, or USD 0.29 per adjusted diluted share, for the first quarter of 2022.

For the first quarter of 2023, adjusted Ebitda was USD 82.4 million, an increase of USD 9.4 million, or 12.9 percent, compared to USD 73.0 million for the first quarter of 2022. The increase in adjusted Ebitda was primarily attributable to the improvement in gross profit described above. Adjusted Ebitda as a percentage of net sales was 16.1 percent for the first quarter of 2023, compared to 13.7 percent for the first quarter of 2022.

Full Year Fiscal 2023 Guidance

B+G Foods reaffirmed its net sales guidance for fiscal 2023 at a range of USD 2.13 billion to USD 2.17 billion, reaffirmed its adjusted Ebitda guidance at a range of USD 310 million to USD 330 million, and reaffirmed its adjusted diluted earnings per share guidance at a range of USD 0.95 to USD 1.15.

B+G Foods provides earnings guidance only on a non-GAAP basis and does not provide a reconciliation of the Company’s forward-looking adjusted Ebitda and adjusted diluted earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for deferred taxes; acquisition/divestiture-related expenses, gains and losses (which may include third-party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up and gains and losses on the sale of certain assets); loss on extinguishment of debt; impairment of assets held for sale; impairment of intangible assets; non-recurring expenses, gains and losses; and other charges reflected in the Company’s reconciliation of historic non-GAAP financial measures, the amounts of which, based on past experience, could be material.

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