Camden / NJ. (csc) Campbell Soup Company reported its results for the third quarter of fiscal 2015. President and Chief Executive Officer Denise Morrison: «In the third quarter, gross margin improved and adjusted Ebit and EPS were better than expected. Sales declined, primarily due to unfavorable currency and the impact of retailer inventory movements on our U.S. soup business».
«Our focus on gross margin performance began to pay dividends, as we expanded margins in a challenging environment. In addition to our productivity improvements and moderating inflation, we achieved net price realization by reducing promotional spending and taking pricing actions on the core businesses. We also made progress in addressing many of the supply chain issues we faced in the first half. Most importantly, several of our businesses delivered strong operating earnings, including the Bolthouse and Foodservice segment. I am especially satisfied with the top- and bottom-line results of our Global Baking and Snacking segment».
«In the quarter, we also made progress against our strategic enterprise redesign, including our cost reduction initiative. We believe that a strategy that focuses on driving growth, aggressively reducing costs and reinvesting a portion of the savings in the areas of our business with the greatest growth potential is the best way to create shareholder value over time».
Third-Quarter Results from Continuing Operations
Sales decreased four percent to 1.9 billion USD, primarily due to the negative impact of currency translation. Organic sales decreased one percent with lower volume, partly offset by lower promotional spending and higher selling prices.
Gross margin increased from 34.3 percent to 35.9 percent. Excluding items impacting comparability in the prior year, gross margin improved 0.7 percentage points. The increase in adjusted gross margin was due to productivity improvements, lower promotional spending and higher selling prices, partly offset by cost inflation and other supply chain costs.
Marketing and selling expenses decreased two percent to 213 million USD, primarily driven by the impact of currency translation and lower marketing overhead expenses, partly offset by increased advertising and consumer promotion expenses. Administrative expenses increased five percent to 141 million USD. Excluding nine million USD of costs related to the implementation of the new organizational structure and cost reduction initiatives, adjusted administrative expenses decreased one percent to 132 million USD.
Adjusted Ebit decreased two percent to 305 million USD, reflecting the unfavorable impact of currency translation and higher marketing expenses on a constant currency basis, partly offset by a higher gross margin percentage.
Net interest expense decreased two million USD to 28 million USD, reflecting lower levels of debt. The tax rate decreased 0.5 percentage points to 29.7 percent. Excluding items impacting comparability, the adjusted tax rate decreased 0.4 percentage points to 30.3 percent.
Nine-Month Results from Continuing Operations
Sales of 6.389 billion USD were comparable to the prior year with volume gains and higher selling prices offset by the negative impact of currency translation and higher promotional spending. Organic sales increased one percent.
Adjusted Ebit decreased four percent to 985 million USD, reflecting a lower gross margin percentage and the unfavorable impact of currency translation, partly offset by the benefit of volume gains and lower marketing and administrative expenses.
Net interest expense decreased eleven million USD to 78 million USD, reflecting lower levels of debt. The tax rate decreased 2.1 percentage points to 29.9 percent. Excluding items impacting comparability, the adjusted tax rate decreased 1.2 percentage points to 30.1 percent. The decrease was primarily due to the favorable resolution of an intercompany pricing agreement between the U.S. and Canada.
Fiscal 2015 Guidance for Continuing Operations
Campbell now expects a year-over-year change in sales closer to the lower end of the previously announced range of minus one to plus one percent; a change in adjusted Ebit closer to the favorable end of the previously announced range of minus seven to minus five percent; and a change in adjusted EPS closer to the favorable end of the previously announced range of minus five to minus three percent or 2.32 USD to 2.38 USD per share. This guidance includes an estimated two-point negative impact from currency translation and is based on an adjusted 52-week 2014 base.
Global Baking and Snacking Segment Operating Review
Sales decreased two percent in the quarter to 555 million USD including seven points of pressure from currency translation. Excluding the negative impact of currency translation, Arnott´s sales increased driven by gains in Australia and Indonesia. Sales of Pepperidge Farm products increased as sales gains in fresh bakery products, crackers and cookies were partly offset by sales declines in frozen products.
Segment operating earnings increased 18 percent to 80 million USD. Higher operating earnings reflected a higher gross margin percentage, volume gains and lower administrative expenses, partly offset by higher marketing expenses and the negative impact of currency translation.
The complete news release inclusive operating review of other the segments (U.S. Simple Meals; International Simple Meals and Beverages; U.S. Beverages; Bolthouse and Foodservice) is available on the Company´s web server.
