Omaha / NE. (caf) ConAgra Foods Inc., one of North America´s leading packaged food companies, reported results for the fiscal 2013 third quarter ended February 24, 2013. Diluted EPS from continuing operations was 0,29 USD in the fiscal third quarter, down from 0,67 USD earned in the year-ago period. Excluding 0,26 USD per diluted share of net expense in the current quarter and 0,14 USD of net benefit in the year-ago period, from items impacting comparability, current quarter EPS of 0,55 USD was four percent above the comparable 0,53 USD earned in the year-ago period. Q3/2013 highlights (percents cited versus year-ago period amounts, where applicable):
- Diluted EPS from continuing operations of 0,29 USD as reported and 0,55 USD adjusted for items impacting comparability, down as reported and up on a comparable basis.
- Consumer Foods´ operating profit increased on a comparable basis, including an approximate 33 percent increase in base business marketing investment. The increase in investment reduced the quarter´s EPS by approximately 0,04 USD per diluted share. Segment sales increased seven percent, driven by acquisitions.
- Commercial Foods´ sales and comparable operating profit increased.
- The company completed the acquisition of Ralcorp on January 29, 2013. ConAgra Foods´ fiscal 2013 third-quarter results include 27 days of EPS contribution from Ralcorp. The company continues to expect EPS benefit of approximately 0,05 USD per diluted share in fiscal 2013 from this transaction.
- As previously stated, the company expects EPS for the full fiscal year, adjusted for items impacting comparability, to be approximately 2,15 USD, resulting in 17 percent comparable year-over-year EPS growth. The 2,15 USD includes approximately 0,05 USD per diluted share benefit from the acquisition of Ralcorp.
- The board of directors approved a dividend of 0,25 USD per common share to be paid on May 31, 2013, to stockholders of record at the close of business on April 30, 2013.
Gary Rodkin, ConAgra Foods´ chief executive officer, said, «We are pleased with the earlier-than-planned closing of the Ralcorp transaction, sequential improvement in our Consumer Foods volumes, comparable profit growth in both of our core business segments and the announcement of Ardent Mills, a new proposed joint venture for our milling operations. Challenges remain for key areas of our business, but a combination of successful margin improvement initiatives and a more favourable input cost environment is enabling us to significantly increase our brand investment and deliver EPS growth».
He continued, «Our organization is very focused on the ongoing integration of Ralcorp, which will play a key role in creating shareholder value. We reaffirm our expected comparable EPS benefit of 0,05 USD in fiscal 2013 results and 0,25 USD in fiscal 2014 results and are very excited about our earnings potential over the next few years. This is a great time to be a part of ConAgra Foods».
Consumer Foods Segment
Branded and non-branded food sold in retail and foodservice channels.
The Consumer Foods segment posted sales of 2’303 USD million and operating profit of 284 million USD for the third quarter, as reported. Sales increased seven percent, reflecting seven percent contribution from acquisitions, three percent favourable price/mix and a three percent organic volume decline. Sequentially, organic volume improved.
- Brands posting sales growth for the quarter include Hebrew National, Hunt´s, Lightlife, Marie Callender´s, PAM, Peter Pan, Rosarita, Ro*Tel, Slim Jim, Swiss Miss, Wesson and others.
- The company has lapped most of the significant pricing taken last fiscal year in response to severe inflation; primarily for this reason, the company expects continued sequential improvement for organic volumes in the fourth fiscal quarter.
Operating profit of 284 million USD declined from 331 million USD in the year-ago period, as reported. After adjusting for five million USD of net expense in the current period and 51 million USD of net benefit in the year-ago period, from items impacting comparability, current-quarter operating profit of 289 million USD increased three percent over 280 million USD in the year-ago period. Marketing investment for the base business (excluding recently completed acquisitions) increased approximately 33 percent, reflecting the company´s planned commitment to building long-term brand strength and the flexibility afforded by improved margins. Operating profit growth reflects a combination of favourable price/mix and other margin management initiatives, a more favourable input cost environment and contribution from acquisitions.
Commercial Foods Segment
Specialty potato, seasonings, blends, flavours and milled grain products sold to foodservice and commercial channels worldwide.
Sales for the Commercial Foods segment were 1’256 million USD, one percent above year-ago period amounts. Segment operating profit was 167 million USD, eleven percent above year-ago period amounts as reported. After adjusting for ten million USD of net expense from items impacting comparability, comparable year-over-year profit growth was 18 percent. The milling operations posted a strong profit increase due to favourable market conditions, good volumes, mix improvement and excellent productivity. To a lesser extent, Lamb Weston potato operations also contributed to segment profit growth, as the benefit of price/mix more than offset the impact of a volume decline primarily resulting from softness in key Asian markets.
Ralcorp Acquisition – less than one month of contribution
Ralcorp businesses contributed a total of 292 million USD in sales and five million USD of operating profit in the fiscal third quarter as reported. After adjusting for 17 million USD of net expense from items impacting comparability, operating profit was 22 million USD. The company currently reports Ralcorp results within two new segments: Ralcorp Food Group and Ralcorp Frozen Bakery Products, listed as such in the segment detail later in this document. The company continues to expect accretion from the Ralcorp acquisition to be approximately 0,05 USD per diluted share this fiscal year, excluding items impacting comparability.
Hedging Activities
This language primarily relates to operations other than the company´s milling operations. Hedge gains and losses are aggregated and net amounts are reclassified from unallocated Corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold. The net of these activities resulted in 27 million USD of unfavourable impact in the current quarter and 22 million USD of favorable impact in the year-ago period. The company identifies these amounts as items impacting comparability.
Fiscal 2013 EPS Outlook
Based on the strong performance to date and the expected contribution from Ralcorp, the company reaffirms expectations for fiscal 2013 diluted EPS to be approximately 2,15 USD, adjusted for items impacting comparability; this represents approximately 17 percent year-over-year growth. The complete news release «ConAgra Foods Reports Third Quarter Comparable EPS Growth Including Significant Increase in Marketing – Reaffirms Full-Year EPS Announces Quarterly Dividend» is available on conagrafoods.com.
