ConAgra: Q2/2012 EPS Stronger Than Planned

Omaha / NE. (caf) ConAgra Foods Inc., one of North America´s leading packaged food companies, reported results for the fiscal 2012 second quarter ended November 27, 2011. Diluted EPS from continuing operations was 0,41 USD, including 0,06 USD per diluted share of net expense from items impacting comparability. Adjusting for those items, diluted EPS from continuing operations was 0,47 USD. For the same period a year ago, diluted EPS from continuing operations as reported and adjusted for items impacting comparability was 0,45 USD. Second-quarter Fiscal 2012 Highlights (versus year-ago amounts):

  • Diluted EPS from continuing operations of 0,41 USD as reported and 0,47 USD adjusted for items impacting comparability, down nine percent as reported and up four percent on a comparable basis.
  • Commercial Foods´ sales grew 16 percent, reflecting pricing actions necessary to cover increased input costs as well as volume growth; operating profit increased 26 percent, primarily due to strong improvement for the Lamb Weston operations.
  • Consumer Foods´ sales increased four percent, reflecting five percent price/mix contribution and a one percent decrease in volume. Operating profit declined eight percent as reported and declined four percent on a comparable basis.
  • The company acquired National Pretzel Company, as well as additional shares in Agro Tech Foods Limited, shortly after the end of the quarter.
  • The company recently announced an increase of 750 million USD to its share repurchase authorization.
  • The company continues to expect fiscal 2012 EPS to reflect a low- to mid-single-digit rate of growth (year-over-year), adjusted for items impacting comparability.
  • The company continues to expect operating cash flow in excess of 1,2 billion USD for the fiscal year.

Gary Rodkin, ConAgra Foods´ chief executive officer: «We are pleased with our progress in both operating segments. The quarter´s higher-than-planned comparable EPS reflects strong double-digit operating profit growth for our Commercial Foods segment, which has successfully overcome difficult operating conditions and implemented pricing. We are encouraged by our progress in fighting inflation in the Consumer Foods segment; volumes for that segment have performed largely as expected given ongoing price increases. The marketplace environment remains difficult due to continuing inflationary pressures and the impact of the current economy on consumers, so we are cautious about business conditions. Our team is managing through these circumstances well by focusing on net price realization, productivity, and appropriate brand support, and we are confident in our ability to deliver our overall EPS and cash flow expectations for the fiscal year».

Consumer Foods Segment (63 percent of YTD sales)

Branded and non-branded food sold in retail and foodservice channels.

The Consumer Foods segment posted sales of 2’178 million USD for the fiscal second quarter, up four percent year-over-year due to price/mix contribution of five percent and a one percent volume decline.

Brands posting sales growth for the quarter include Banquet, Chef Boyardee, Hunt´s, Marie Callender´s, Orville Redenbacher´s, PAM, Peter Pan, Reddi-wip, Rosarita, Slim Jim, Snack Pack, Swiss Miss, Van Camp´s, Wesson, Wolf, and others.

Operating profit of 256 million USD was eight percent below last year´s 279 million USD, as reported. Restructuring charges of 15 million USD in the current quarter and five million USD in the year-ago period are included in reported results; adjusting for these amounts, current quarter operating profit of 271 million USD was four percent below the comparable 284 million USD in the year-ago period. In terms of operating profit impact, the combination of pricing and strong cost savings almost offset inflation of ten percent this quarter; marketing investment was slightly higher, as planned.

The company is encouraged by its pricing progress to date, and remains cautious in its near-term outlook for this segment largely due to upwardly revised estimates for near-term inflation and the possibility of further volume impact given ongoing pricing initiatives. Largely reflecting the timing of inflation and marketing investments, the company expects this segment´s second-half operating profit growth to occur in the fiscal fourth quarter.

Commercial Foods Segment (37 percent of YTD sales)

Specialty products sold to foodservice and commercial channels worldwide.

Sales for the Commercial Foods segment were 1’226 million USD, 16 percent above year-ago amounts; the growth reflects the pass-through of higher wheat costs in the milling operations as well as price increases at Lamb Weston potato operations necessitated by high operating costs. The segment´s sales performance also reflects volume growth for the major product lines.

The segment´s operating profit increased 26 percent to 161 million USD, which was higher than planned. The segment´s most significant profit improvement came from the Lamb Weston operations, which benefited from pricing actions taken over the last few months to address input cost inflation; Lamb Weston also benefited from operating efficiencies and volume growth. Sweet potato products for the foodservice channel and Alexia branded products in the retail channel continue to demonstrate momentum, helping drive favourable mix. The milling operations also posted improved profitability due to favourable market conditions, efficiencies and mix.

As previously communicated, the company expects this segment to post improved year-over-year profitability in the second half of the year.

Fiscal 2012 Guidance Reaffirmed – Second-half Details

The company continues to expect fiscal 2012 full-year diluted EPS, adjusted for items impacting comparability, to grow at a low- to mid-single-digit rate over the comparable 1,75 USD earned last fiscal year. The fiscal year´s EPS expectations reflect the benefit of the strong performance in the fiscal second quarter and recent acquisitions, as well as upwardly revised inflation estimates and continued challenging business conditions in the second half of the year. The company currently estimates that inflation for the Consumer Foods segment will be in the range of ten percent for the full fiscal year. Based on its assessment of the overall business climate as well as the nature of the quarterly year-over-year EPS comparisons, the company expects its fiscal 2012 second-half EPS growth to be concentrated in the fiscal fourth quarter.