Campbell: Higher costs hit profits in Q3/2012

Camden / NJ. (csc) Campbell Soup Company reported its results for the third quarter of fiscal 2012. Overview:

  • Sales Even at 1,8 Billion USD; Excluding Currency, Sales Increased one Percent
  • Sales Gains in Global Baking and Snacking and U.S. Beverages, Offset by Declines in U.S. Simple Meals and International Simple Meals and Beverages
  • Adjusted Ebit Declined 13 Percent
  • EPS Benefited from a Lower Tax Rate
  • Confirmed Fiscal 2012 Guidance: Sales and Adjusted Ebit at Lower End of Range, Adjusted EPS at Upper End of Range

Net earnings for the quarter ended April 29, 2012, were 177 million USD or 0,55 USD per share, compared with 187 million USD or 0,57 USD per share in the prior year. The current quarter´s reported net earnings included charges associated with a restructuring program announced in June 2011. Excluding items impacting comparability, adjusted net earnings decreased four percent to 180 million USD and adjusted net earnings per share decreased two percent to 0,56 USD in the current quarter.

Denise Morrison, Campbell´s President and Chief Executive Officer: «We continued to advance our strategies to stabilize and then profitably grow North America soup and simple meals, expand our international presence and continue to drive growth in healthy beverages and baked snacks. Although overall sales trends are improving, we are not satisfied with our performance this quarter. As planned, we focused our marketing efforts on increasing advertising and consumer promotion. We executed well in some businesses, delivering solid sales growth in U.S. Beverages, Pepperidge Farm and Canada. We did not execute as well in others».

Morrison concluded: «We remain committed to our three growth strategies. At Campbell, we are building a business for the long term through innovation, brand building and expansion into higher growth segments that connect with today´s consumers. We have made solid progress reinvigorating our innovation pipeline and customers have responded favourably to the new products we have planned for next year. With continued focus on our strategies, we plan to deliver sustainable profitable net sales growth that will create value for shareholders».

Fiscal 2012 Guidance

Campbell expects net sales growth to be between zero and two percent, a decline in adjusted Ebit of between (nine) and (seven) percent and a decline in adjusted EPS of between (seven) and (five) percent, putting adjusted EPS in the range of 2,35 USD to 2,42 USD, from the 2011 adjusted base of 2,54 USD. Management expects to achieve this guidance range, with sales and adjusted Ebit near the lower end of the range and adjusted EPS, benefiting from a favourable tax rate, near the upper end of the range.

Global Baking and Snacking

Summary of Q3/2012 and Nine-Month Results

Sales for Global Baking and Snacking were 543 million USD for the third quarter, an increase of three percent from a year ago. A breakdown of the change in sales follows:

  • Price and sales allowances added six percent
  • Increased promotional spending subtracted four percent
  • Currency added one percent

Further details of sales results included the following:

  • Sales of «Pepperidge Farm» products increased, reflecting higher selling prices across the portfolio, partly offset by increased promotional spending.
    • In cookies and crackers, sales increased, driven by double-digit growth in «Goldfish» snack crackers, partly offset by declines in cookies.
    • Bakery sales decreased reflecting declines in the category.
  • Excluding the favourable impact of currency, sales in Arnott´s were comparable to the prior year as strong growth in Indonesia was offset by declines in Australia.

Operating earnings for the quarter were 73 million USD compared with 82 million USD in the prior year. The eleven-percent decline was primarily due to cost inflation and increased promotional spending, partly offset by higher selling prices and productivity improvements.

For the first nine months, sales increased three percent to 1’637 million USD. A breakdown of the change in sales follows:

  • Volume and mix subtracted three percent
  • Price and sales allowances added six percent
  • Increased promotional spending subtracted two percent
  • Currency added two percent

Operating earnings decreased twelve percent to 232 million USD compared with 263 million USD in the year-ago period, primarily due to cost inflation, increased promotional spending and higher advertising, partly offset by higher selling prices and productivity improvements.