Campbell: organic sales up 5 percent in Q1/2015

Camden / NJ. (csc) Campbell Soup Company reported its results for the first quarter of fiscal 2015. Denise Morrison, Campbell´s President and Chief Executive Officer: «We were encouraged by our organic sales growth across most of our portfolio, particularly in U.S. Simple Meals and Global Baking and Snacking».

«Our U.S. soup performance was driven by a stronger seasonal sell-in and the timing of our quarter end relative to the Thanksgiving holiday. The performance of our Australian biscuit business improved with better customer execution and innovation. We were pleased with the continued positive momentum in Bolthouse Farms, Plum and Kelsen. Although our year is off to a solid start, we are facing some challenges. Our gross margin performance did not meet our expectations due largely to higher than anticipated commodity costs and supply chain costs. We have plans to offset gross margin pressure in the remainder of the year. We also are facing headwinds from currency. Despite these challenges, we continue to make progress strengthening our core business and expanding into faster-growing spaces».

Campbell Adjusts Fiscal 2015 Guidance for Continuing Operations

Anthony DiSilvestro, Campbell´s Senior Vice President and Chief Financial Officer, said, «Based on headwinds from currency translation, we have reduced the low end of our guidance ranges. Importantly, our currency-neutral expectations have not changed». Due to the unanticipated volatility in foreign currencies, Campbell has lowered the bottom of the range of its fiscal 2015 guidance. Based on currency rates effective at quarter end, currency is estimated to have a negative one-point impact on both reported sales and earnings, or 0.03 USD per share. Campbell now expects growth of zero to two percent in sales; minus one to plus two percent in adjusted Ebit; and minus one to plus two percent in adjusted EPS, or 2.42 USD to 2.50 USD per share. This guidance is based on an adjusted 52-week 2014 base. The company´s previous guidance was growth of one to two percent in sales; zero to two percent in adjusted Ebit; and zero to two percent in adjusted EPS, or 2.45 USD to 2.50 USD per share.

U. S. Simple Meals

Sales increased eight percent to 928 million USD. U.S. soup sales increased six percent, driven by movements in retailer inventory levels as well as the timing of the quarter end in relation to the holiday season. Sales increased six percent in Campbell´s condensed soups and 17 percent in broth, while sales of ready-to-serve soups were comparable to the prior year. Sales of other simple meals rose 14 percent, driven by growth in Plum, Prego pasta sauces and Campbell´s dinner sauces. Segment operating earnings increased 15 percent to 242 million USD, of which eight points related to the benefit of lapping the Plum recall in the prior-year quarter. Higher operating earnings also reflected volume gains, productivity improvements and lower marketing and administrative expenses, partly offset by cost inflation and higher supply chain costs.

Global Baking and Snacking

Sales grew three percent to 627 million USD. Arnott´s sales increased driven by volume gains in Australia and Indonesia, partly offset by the negative impact of currency and higher promotional spending. Sales of Pepperidge Farm products were comparable to the prior year as volume gains were offset by higher promotional spending. Within Pepperidge Farm, sales gains of fresh bakery products and cookies were offset by sales declines in crackers and frozen products. Segment operating earnings increased 15 percent to 90 million USD, due to volume gains, productivity improvements and the benefit of lapping the purchase accounting adjustment in the prior-year quarter related to the acquisition of Kelsen, partly offset by increased promotional spending.

International Simple Meals and Beverages

Sales declined two percent to 189 million USD. Excluding the negative impact of currency, sales gains in Canada and the Asia Pacific region were partly offset by declines in Latin America. Segment operating earnings decreased 20 percent to 16 million USD, driven by an increase in marketing and administrative expenses and the negative impact of currency, partly offset by volume gains.

U.S Beverages

Sales decreased three percent to 168 million USD. Declines in V8 V-Fusion beverages and V8 vegetable juice were partly offset by gains in V8 Splash beverages. Segment operating earnings increased eight percent to 26 million USD, primarily due to a reduction in marketing expenses, partly offset by a lower gross margin percentage and volume declines.

Bolthouse and Foodservice

Sales increased four percent to 343 million USD, reflecting continued double-digit growth in Bolthouse Farms premium refrigerated beverages and salad dressings. Sales in North America Foodservice were comparable to the prior year. Segment operating earnings declined 24 percent to 22 million USD, reflecting a lower gross margin percentage, partly offset by lower administrative expenses and volume gains, as well as reduced advertising in the Bolthouse Farms brand.

Unallocated Corporate Expenses

Unallocated corporate expenses for the quarter were 28 million USD compared with 36 million USD a year ago. The prior-year quarter included two million USD of restructuring-related costs and a nine million USD loss on foreign exchange forward contracts related to the sale of the European simple meals business.

Cash Flow from Operations

Cash flow from operations was 188 million USD compared to 38 million USD a year ago, primarily due to lower working capital requirements, lower pension contributions and lower payments on hedging activities, partially offset by lower cash earnings.

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