Camden / NJ. (csc) Campbell Soup Company reported its results for the second quarter of fiscal 2014. U.S. Simple Meals sales rose seven percent; earnings increased twelve percent. Including the acquisition of Kelsen Group, Global Baking and Snacking sales were up 14 percent; earnings increased 19 percent. U.S. Beverages sales declined three percent; earnings decreased 16 percent.
The company reported earnings from continuing operations for the quarter ended Jan. 26, 2014, of 235 million USD or 0,74 USD per share, compared with earnings of 171 million USD or 0,54 USD per share, in the prior year. In the second quarter of fiscal 2014, the company and its joint venture partner Swire Pacific Limited agreed to restructure manufacturing and streamline operations for its soup business in China. The company recorded pre-tax restructuring charges of 13 million USD (5 million USD after tax or 0,02 USD per share in earnings from continuing operations attributable to Campbell Soup Company) related to this initiative. Excluding items impacting comparability in both periods, adjusted earnings from continuing operations increased 19 percent to 240 million USD compared with 201 million USD in the prior year´s quarter and adjusted earnings per share from continuing operations increased 19 percent to 0,76 USD compared with 0,64 USD in the year-ago quarter. A detailed reconciliation of the reported financial information to the adjusted information is included at the end of this news release.
Denise Morrison, Campbell´s President and Chief Executive Officer, said, «We remain focused on strengthening our core business and expanding into higher-growth spaces as we reshape our portfolio to improve Campbell´s long-term growth trajectory. We made progress on both fronts in the second quarter after a slow start to the year. In the quarter, we delivered six percent reported net sales growth and 15 percent adjusted Ebit growth, driven by our core business and the Kelsen Group acquisition. We also closed on the divestiture of our European simple meals business. Finally, we maintained our steadfast focus on driving productivity and managing costs».
«Our improved performance included seven percent growth in U.S. Simple Meals, driven largely by an increase of five percent in U.S. Soup sales reflecting strong holiday shipments and increased retailer inventory levels, as well as gains from our new ‘Campbell´s´ dinner sauces and ‘Prego´ white sauces. In Global Baking and Snacking, Pepperidge Farm continued to deliver growth in ‘Goldfish´ crackers, cookies and fresh bakery. Kelsen Group, which we acquired to expand our snacks business in developing markets, performed well in China and Hong Kong during their important holiday season. Indonesia continued to post double-digit sales growth. Bolthouse Farms also drove solid growth with double-digit sales increases in premium refrigerated beverages and salad dressings».
Morrison continued, «We still face some challenges in U.S. Beverages and Australia, but we have taken steps to strengthen these businesses. In January, we transitioned «V8» single-serve products to a new national distribution network that will focus on driving growth in immediate consumption channels over time. In Australia, we brought in new leadership for Asia Pacific, developed a more focused plan for our core biscuit business and implemented initiatives to reduce costs».
Morrison concluded, «While I am encouraged by our second-quarter results, our team recognizes that our full-year guidance demands that we continue to deliver improved performance in the second half. We expect our U.S. Soup business to benefit from eight new soups that were launched last month, including our first Latin-inspired cooking soups. We anticipate a stronger second half from Pepperidge Farm, particularly in the ‘Goldfish´ franchise. We expect continued strong performance from Bolthouse Farms, which will launch an exciting suite of innovative new beverages and salad dressings this spring. We expect a more meaningful contribution from Plum Organics as the products impacted by the voluntary recall in November return to shelf. We also plan to improve profitability as we continue to focus on reducing costs and driving efficiency in our supply chain. We remain focused on executing against our aggressive but realistic plans to drive growth in the back half and deliver our full-year guidance».
Campbell Reiterates Fiscal 2014 Guidance for Continuing Operations
The company confirmed its fiscal 2014 guidance. Campbell expects continuing operations to grow sales by four to five percent, adjusted Ebit to grow by four to six percent and adjusted EPS to grow by two to four percent or 2,53 USD to 2,58 USD per share. Fiscal 2014 guidance includes the benefits of a 53rd week, acquisitions, the estimated impact of currency translation and the impact of presenting revenue on a net basis in connection with the company´s new business model in Mexico.
Second-Quarter Results from Continuing Operations
For the second quarter, sales from continuing operations increased six percent to 2’281 million USD. Organic sales increased by three percent. The increase in sales for the quarter reflected the following factors:
Second-Quarter Financial Details – Global Baking and Snacking only
Sales for Global Baking and Snacking were 639 million USD for the second quarter, an increase of 14 percent from a year ago. The acquisition of Kelsen Group contributed 92 million USD to sales growth. The increase in sales reflected the following factors:
Further details of sales results included the following:
- Sales of Pepperidge Farm products increased, driven by higher selling prices and volume gains, partially offset by increased promotional spending.
- Sales of fresh bakery products increased versus the prior year, driven by volume gains in bread and stuffing.
- In cookies and crackers, sales increases were driven by gains in «Goldfish» snack crackers and «Pepperidge Farm» cookies, partly offset by declines in adult cracker varieties.
- Sales at Arnott´s decreased primarily due to the negative impact of currency and sales declines in Australia, which were partially offset by strong gains in Indonesia.
Operating earnings for the quarter were 88 million USD, an increase of 19 percent over the prior year. Operating earnings increased primarily driven by the acquisition of Kelsen Group, higher selling prices and productivity improvements, partly offset by cost inflation and higher promotional spending. The operating earnings increase reflects Kelsen Group´s operating results and growth in Pepperidge Farm, partly offset by lower earnings in Arnott´s.
For the first half, sales increased ten percent to 1’248 million USD. The acquisition of Kelsen Group contributed 144 million USD to sales growth. A breakdown of the change in sales follows:
Operating earnings in the first half were 166 million USDcompared with 159 million USD in the year-ago period, an increase of four percent. The increase in operating earnings was primarily driven by higher selling prices, productivity improvements and the acquisition of Kelsen Group, partially offset by cost inflation and higher promotional spending. The operating earnings increase reflected Kelsen Group´s operating results and growth in Pepperidge Farm, partly offset by lower earnings in Arnott´s and the unfavorable impact of currency.
Unallocated Corporate Expenses
Unallocated corporate expenses for the quarter were 33 million USD compared with 80 million USD a year ago. The prior-year quarter included 40 million USD of restructuring-related costs. The balance of the decrease for the current quarter was primarily due to lower incentive compensation costs. Unallocated corporate expenses for the first half were 69 million USD compared with 146 million USD in the prior year. The current year 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. The prior year included 61 million USD of restructuring-related costs and ten million USD of transaction costs related to the Bolthouse Farms acquisition. The balance of the decrease for the first half was primarily due to lower incentive compensation costs and gains on foreign exchange transactions and open commodity hedges.
Results from Discontinued Operations
The company completed the divestiture of its European simple meals business to CVC Capital Partners on Oct. 28, 2013. Results for the European simple meals business are reported as discontinued operations. In the second quarter, the company recognized a net gain of 90 million USD after tax or 0,28 USD per share, from the sale of the European simple meals business. For the first half, net earnings from discontinued operations were 81 million USD or 0,26 USD per share.
Combined Continuing and Discontinued Operations
Combining results of continuing and discontinued operations for the second quarter, the company reported net earnings of 325 million USD compared with 190 million USD in the prior year. Net earnings per share were 1,03 USD compared with 0,60 USD in the prior year. For the first half, the company reported net earnings of 497 million USD compared with 435 million USD in the prior year. Net earnings per share were 1,57 USD compared with 1,38 USD in the prior year.