ConAgra Foods: meets expectations in Q4/2009

Omaha / NE. (caf) ConAgra Foods Inc., one of North America´s leading food companies, reported results for the fiscal 2009 fourth quarter ended May 31, 2009. Overall sales grew eight percent. Diluted EPS from continuing operations was 0,39 USD for the quarter, an increase of 129 percent from prior-year levels of 0,17 USD. Excluding 0,02 USD per diluted share of net expense in the current quarter and 0,01 USD of net expense in the year-ago period from items impacting comparability, diluted EPS from continuing operations in the current quarter was 0,41 USD, an increase of 128 percent from 0,18 USD earned in the same period a year ago. Items impacting comparability are summarized toward the end of this release. The company estimates that the extra week this quarter provided approximately 0,03 USD of EPS, which enabled additional marketing and innovation investments; the company anticipated the benefit of an extra week as it developed its plans for increased marketing investment for the fourth quarter of fiscal 2009.

Gary Rodkin, ConAgra Foods´ chief executive officer, said, «We posted a very good fourth quarter and delivered full-year EPS in line with our recent guidance. Consumer Foods made significant progress in the second half of the year, and I am pleased with the momentum that is building. Commercial Foods continues to deliver good results and to navigate the challenges of its markets very well. The overall health of our business is very good. Given our strengthening execution, moderating inflation, and the benefit of innovation, we are in a good position to deliver healthy EPS growth in fiscal 2010 while increasing investment in our brands. Our estimate of fiscal 2010 diluted EPS from continuing operations is 1,63 to 1,66 USD per share, excluding items impacting comparability. We will provide investors with the customary updates on our progress and expectations throughout the fiscal year».

Subsequent to quarter-end, there was a tragic accident at the company´s Garner, N.C., Slim Jim manufacturing plant. Since the event, the company has relied on existing inventories of Slim Jim to service customer needs, although shipments have been at reduced levels. The company is in the process of re-establishing production capacity for the brand. Although service disruptions are likely during the first quarter of fiscal 2010, the company expects the business to achieve acceptable service levels during the second quarter of fiscal 2010 and expects the accident to have no material impact on long-term brand dynamics.

The company maintains comprehensive property and general liability insurance policies with very significant loss limits that it believes will provide substantial and broad coverage for the currently foreseeable losses arising from this event. The company anticipates that it will incur modest costs related to deductibles and co-payment obligations under available insurance policies, as well as other one-time costs that are not currently expected to be material. The company currently plans to treat these amounts, as well as any net gain or loss from insured losses, asset write offs, and insurance recoveries under these policies, as items impacting comparability in earnings releases for fiscal 2010, which began on June 01, 2009.

The company also maintains business interruption insurance with significant limits that it anticipates will respond to this situation. For the purposes of providing annual earnings estimates for fiscal 2010, the company currently expects amounts received from business interruption insurance to substantially compensate for any foregone Slim Jim profits from the disruption, and thus will not treat any business interruption insurance proceeds as items impacting comparability.

Consumer Foods Segment (63 percent of Fiscal 2009 Sales)

Branded consumer products sold in retail and foodservice channels.

The Consumer Foods segment posted sales of 2’138 million USD and operating profit of 271 million USD in the fiscal 2009 fourth quarter, and 1’878 million USD of sales and 177 million USD of operating profit in the year-ago period.

Fourth-quarter fiscal 2009 Consumer Foods sales growth was 14 percent, reflecting eight percent contribution from pricing and mix, seven percent unit growth, and minus one percent impact from unfavourable foreign currency exchange rates. The company estimates that an extra week this quarter added approximately seven percentage points to sales and unit volume growth. Due to a combination of on-trend new products, significantly improved marketing, and a strong value-orientation in the company´s branded portfolio, many brands posted strong sales growth, even without the benefit of an extra week in the current quarter.

Recent innovation, along with other transformational improvements in its frozen foods business and strong marketing campaigns, produced double-digit sales growth among major frozen brands. Other brands also posted double-digit sales growth. Brand details and sub-segment performance can be found in the financial information and Q+A document accompanying this release on ConAgra´s web server.

Fourth-quarter fiscal 2009 Consumer Foods operating profit increased 53 percent to 271 million USD over the prior-year amount of 177 million USD. Excluding 17 million USD of net expense in prior-year amounts from items impacting comparability, current quarter comparable operating profit increased 40 percent. While still significant, input cost inflation was much less severe than in recent quarters. Inflation was more than offset by strong supply chain savings as well as successful selling, general, and administrative expense (SG+A) focus, resulting in Dollar profit and margin percentage improvement. Marketing expense increased by approximately 16 million USD, supported by the benefit of the extra week. Changes in foreign exchange rates negatively impacted profitability by approximately eleven million USD.

The company is confident that its innovation, marketing, and cost-savings initiatives, combined with more manageable input cost inflation, will result in strong year-over-year operating profit growth and operating margin expansion for this segment in fiscal 2010.

Commercial Foods Segment (37 percent of Fiscal 2009 Sales)

Specialty potato products, dehydrated vegetables, seasonings, blends, flavours, and milled grain products sold to foodservice, retail and commercial channels worldwide.

For the fiscal fourth quarter, sales for the Commercial Foods segment were 1’160 million USD, down two percent from year-ago amounts; the decline reflects lower flour prices due to lower underlying wheat costs at ConAgra Mills. Despite challenging foodservice industry conditions, Lamb Weston specialty potato operations posted good sales results due to favourable mix as well as pricing actions that followed raw product cost increases. Acquisitions also contributed to Lamb Weston´s sales growth. The company estimates that the extra week added approximately seven percentage points of growth to the overall segment´s sales.

Segment operating profit was 155 million USD for the quarter, 35 percent above year-ago amounts, reflecting strong sales, efficiencies, and mix at Lamb Weston, as well as better flour milling margins due to plant efficiencies, mix, and effective risk management at ConAgra Mills. Profits for Gilroy Foods and Flavors were below year-ago amounts given the impact of the weak economy on some foodservice-related customers. The extra week also benefited current quarter profit growth for the overall segment.

The company expects this segment´s operating profits in fiscal 2010 to be roughly in line with those of fiscal 2009, largely reflecting operating efficiencies, as well as challenges for some restaurant and industrial customers throughout fiscal 2010, along with a fiscal 2010 forecast for less favorable market conditions for flour milling.

Info: ConAgra Foods Fourth Quarter EPS from Continuing Operations More Than Doubles Versus Year-Ago Period; EPS of 1,63 USD to 1,66 USD Expected in Fiscal 2010, Excluding Items Impacting Comparability (complete press release).

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