B+G Foods: Reports Strong Net Sales for Q1-2021

Parsippany / NJ. (bgs) B+G Foods Inc. announced financial results for the first quarter of 2021.

First Quarter 2021 Financial Summary versus Q1-2020

  • Net sales increased 12.4 percent to USD 505.1 million, driven by the Crisco acquisition and continued strong base business net sales
  • Diluted earnings per share decreased 6.8 percent to USD 0.41
  • Adjusted diluted earnings per share increased 13.0 percent to USD 0.52
  • Net income decreased 4.3 percent to USD 26.9 million
  • Adjusted net income increased 16.7 percent to USD 34.1 million
  • Adjusted Ebitda increased 15.2 percent to USD 92.9 million
  • Adjusted Ebitda before Covid-19 expenses increased 18.5 percent to USD 95.8 million
  • Net sales guidance reaffirmed at a range of USD 2.05 billion to USD 2.10 billion

Commenting on the results, Interim President and Chief Executive Officer David L. Wenner stated, «Overall, the first quarter of 2021 played out much as we expected, with substantial net sales gains for the first ten weeks of the quarter and then tough comparisons in the last few. The last two weeks of the first quarter of 2020 essentially saw four weeks of normal sales volume compressed into two as Covid-driven panic buying commenced. In total for the first quarter of 2021, we achieved record first quarter net sales of USD 505.1 million, a 12.4 percent increase from the first quarter of 2020. Base business net sales, which excludes the Crisco acquisition completed last December, were virtually flat versus first quarter 2020. U.S. base business net sales were up 2.5 percent while international base business net sales – predominantly Canada – brought overall base business net sales to a slight negative. Despite the tough comparisons and supply chain constraints for certain of our brands, most notably Green Giant canned products, our net sales across our portfolio remained strong as compared to 2019, especially in areas such as baking and spices + seasonings. Foodservice net sales strengthened as well, helping overall performance. Although demand for our brands remains strong, we expect our base business net sales for the second quarter to trend much closer to our 2019 net sales than our 2020 net sales, given the extraordinary demand in last year’s second quarter at the height of the pandemic.»

Wenner continued, «The first quarter was our first full quarter of ownership of the Crisco brand and we were very pleased with its performance. At USD 58.1 million in net sales it is tracking to our expectations, and margins were accretive to our overall results. We do face temporary cost challenges with the brand, as the cost of oils used in the products has more than doubled since this time last year. But we view these very high levels as an anomaly that we expect will ease over time. Meanwhile we own what we see as an iconic brand that fits well with our portfolio of products related to baking at home, a revitalized consumer behavior.»

Financial Results for the First Quarter of 2021

Net sales for the first quarter of 2021 increased USD 55.7 million, or 12.4 percent, to USD 505.1 million from USD 449.4 million for the first quarter of 2020. Net sales of Crisco, acquired on December 1, 2020, contributed USD 58.1 million to the Company’s net sales for the quarter.

Base business net sales for the first quarter of 2021 decreased USD 2.5 million, or 0.6 percent, to USD 446.9 million from USD 449.4 million for the first quarter of 2020. Base business net sales in the first quarter of 2021 continued to benefit from very strong demand for the Company’s products. Significant year-over-year base business net sales gains in January and February were offset by a year-over-year decrease in base business net sales in March due to the extraordinary Covid-related demand for the Company’s products and pantry loading in March 2020. Although demand remains strong and base business net sales are expected to continue to outpace fiscal 2019 levels, the Company expects base business net sales to decline year-over-year in the second quarter of 2021 given the extraordinary demand and pantry loading at the height of the pandemic. The decrease in base business net sales for the first quarter of 2021 reflected a decrease in unit volume of USD 9.8 million, partially offset by an increase in net pricing and the impact of product mix of USD 6.6 million and the positive impact of foreign currency of USD 0.7 million.

Net sales of the Company’s spices + seasonings increased USD 30.0 million, or 41.2 percent; net sales of Maple Grove Farms increased USD 2.3 million, or 12.1 percent; and net sales of Ortega increased USD 0.2 million, or 0.4 percent, in the first quarter of 2021, as compared to the first quarter of 2020. Net sales of Green Giant (including Le Sueur) decreased USD 25.9 million, or 16.4 percent; net sales of Clabber Girl decreased USD 1.3 million, or 6.8 percent; and net sales of Cream of Wheat decreased USD 0.7 million, or 4.0 percent, in the first quarter of 2021, as compared to the first quarter of 2020. Net sales of all other brands in the aggregate decreased USD 7.1 million, or 5.6 percent, for the first quarter of 2021.

Gross profit was USD 117.8 million for the first quarter of 2021, or 23.3 percent of net sales. Excluding the negative impact of USD 5.5 million of acquisition/divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold during the first quarter of 2021, the Company’s gross profit would have been USD 123.3 million, or 24.4 percent of net sales. Gross profit was USD 104.9 million for the first quarter of 2020, or 23.3 percent of net sales. Excluding the negative impact of USD 2.3 million of acquisition/divestiture-related expenses and non-recurring expenses included in cost of goods sold during the first quarter of 2020, the Company’s gross profit would have been USD 107.2 million, or 23.9 percent of net sales.

Selling, general and administrative expenses increased USD 10.4 million, or 26.0 percent, to USD 50.4 million for the first quarter of 2021 from USD 40.0 million for the first quarter of 2020. The increase was composed of increases in warehousing expenses of USD 4.1 million, consumer marketing expenses of USD 4.0 million, acquisition/divestiture-related and non-recurring expenses of USD 1.9 million and general and administrative expenses of USD 1.3 million, partially offset by a decrease in selling expenses of USD 0.9 million. The increase in warehousing expenses was primarily driven by the Crisco acquisition and customer fines related to Covid-19 shortages and delays. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 1.1 percentage points to 10.0 percent for the first quarter of 2021, compared to 8.9 percent for the first quarter of 2020.

Net interest expense increased USD 1.0 million, or 3.6 percent, to USD 27.0 million for the first quarter of 2021 from USD 26.0 million in the first quarter of 2020. The increase was primarily attributable to an increase in average long-term debt outstanding during the first quarter of 2021 as compared to the first quarter of 2020, primarily as a result of incremental borrowings the Company made in the fourth quarter of 2020 to fund the Crisco acquisition and related fees and expenses. The increase in net interest expense was partially offset by a lower effective cost of borrowing during the first quarter of 2021.

The Company’s net income was USD 26.9 million, or USD 0.41 per diluted share, for the first quarter of 2021, compared to net income of USD 28.1 million, or USD 0.44 per diluted share, for the first quarter of 2020. Although operating income increased in the first quarter of 2021, largely driven by the Crisco acquisition, the increase was offset by an increase in income tax expense. The Company’s net income in the first quarter of 2020 benefited from a discrete tax benefit of USD 2.3 million related to the U.S. CARES Act. The Company’s adjusted net income for the first quarter of 2021, which excludes, among other things, the impact of the discrete tax benefit received in the first quarter of 2020, was USD 34.1 million, or USD 0.52 per adjusted diluted share, compared to USD 29.2 million, or USD 0.46 per adjusted diluted share, for the first quarter of 2020.

For the first quarter of 2021, adjusted Ebitda was USD 92.9 million, an increase of USD 12.2 million, or 15.2 percent, compared to USD 80.7 million for the first quarter of 2020. The increase in adjusted Ebitda was primarily attributable to increased net sales, primarily resulting from the Crisco acquisition. Adjusted Ebitda as a percentage of net sales was 18.4 percent for the first quarter of 2021, compared to 18.0 percent in the first quarter of 2020.

For the first quarter of 2021, adjusted Ebitda before Covid-19 expenses was USD 95.8 million, an increase of USD 15.0 million, or 18.5 percent, compared to USD 80.8 million for fiscal 2020. Covid-19 expenses of USD 2.9 million and USD 0.2 million for the first quarter of 2021 and the first quarter of 2020, respectively, include temporary enhanced compensation for the Company’s manufacturing employees, compensation the Company continues to pay manufacturing employees while in quarantine (which is incremental to the compensation the Company pays to the manufacturing employees who produce the Company’s products while others are in quarantine), and expenses relating to other precautionary health and safety measures. Adjusted Ebitda before Covid-19 expenses as a percentage of net sales was 19.0 percent for the first quarter of 2021, compared to 18.0 percent in the first quarter of 2020.

Full Year Fiscal 2021 Guidance

B+G Foods reaffirmed its net sales guidance for full year fiscal 2021. Net sales, which will be positively impacted by a full twelve months of ownership of the Crisco brand, are expected to be approximately USD 2.05 billion to USD 2.10 billion.

B+G Foods continues to see strong consumer demand for its products and expects to see commensurate elevated levels of net sales throughout the remainder of fiscal 2021. The Company has also seen and expects to continue to see cost inflation for various inputs, including ingredients, packaging and transportation. The Company has initiated various revenue enhancing activities and cost savings initiatives to offset these costs but there can be no assurance at this point of the ultimate effectiveness of these activities and initiatives. Because the Company’s management is not able to fully estimate the impact Covid-19, cost inflation and the Company’s cost inflation mitigation efforts will have on the Company’s results for the remainder of fiscal 2021, the Company is unable at this time to provide more detailed guidance for full year fiscal 2021. The ultimate impact of the Covid-19 pandemic on the Company’s business will depend on many factors, including, among others: how long social distancing and stay-at-home and work-from home policies and recommendations remain in effect; whether additional waves of Covid-19 will affect the United States and the rest of North America; the Company’s ability to continue to operate its manufacturing facilities, maintain its supply chain without material disruption, procure ingredients, packaging and other raw materials when needed despite unprecedented demand in the food industry; the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating and shopping habits; and the extent to which consumers continue to work remotely even after the pandemic subsides and how that may impact consumer habits.