Downers Grove / IL. (slc) Sara Lee Corporation posted a 22 percent profit decline as consumers traded down to store-brand products, the US-Dollar strengthened and commodity costs continued to rise. Still, the fiscal-third-quarter profit of 0,24 USD a share topped analysts´ expectations, and the company raised its adjusted earnings-per-share guidance for the fiscal year to a range of 0,75 USD to 0,81 USD a share, up from 0,73 USD to 0,80 USD. Adjusted earnings exclude significant acquisitions or divestitures.
Sara Lee said in a statement, net income fell to 165 million USD in the quarter ended March 28, compared with year-ago earnings of 211 million USD. Sales from continuing operations fell 6,6 percent to three billion USD. Sales in its North American retail and fresh-bakery segments grew 3,1 percent and 6,4 percent, respectively, to 646 million USD and 530 million USD amid new-product introductions, price increases and consumer purchases of store-branded foods Sara Lee makes. Sales decreased in all other segments. The company was able to raise prices in all of its segments in the quarter, but the combination of converting foreign currency to US-Dollars and decreases in the amount of products customers purchased helped drive the sales declines.
The company said commodity costs would continue to rise, increasing 410 million USD this fiscal year. Even though prices for many commodities have fallen from last year, which bodes well for the food industry, investors have been watching closely to see if food makers´ profits will be hurt as retailers push for lower prices. Chief Executive Brenda Barnes said the company´s market shares remained steady in international markets even as those markets weakened generally. Sara Lee has been shedding assets since 2005 and said in the most recent quarter that it has been trying to sell its European household- and body-care-products business.
The complete press release «Sara Lee Reports Strong Operating Income in Third Quarter Of Fiscal 2009» (PDF / 17 pages / 374 KB) provides information about the company and its performance in Q3/2009 and the first nine months of fiscal 2009. Catchwords: «Summary», «Nine Months Results», «Third Quarter Financial Highlights», «Other Business Highlights», «North American Retail», «North American Fresh Bakery», «North American Foodservice», «International Beverage», «International Bakery», «International Household and Body Care» (…). This article here only provides information as follows:
Nine Months Results
For the first nine months of fiscal 2009, Sara Lee reported net sales of 9,7 billion USD, comparable to the same period last year, while adjusted net sales rose 4,1 percent in that period. Operating income was 648 million USD, compared to 766 million USD in the first nine months of fiscal 2008 – a decrease of 15,4 percent, while adjusted operating income increased 6,3 percent. Diluted EPS were 0,54 USD, compared to 0,82 USD for the first nine months of fiscal 2008. Diluted EPS excluding significant items for the comparable nine month periods were 0,77 USD versus 0,71 USD.
North American Fresh Bakery
- Net sales increased 6,4 percent to 530 million USD in the third quarter of fiscal 2009, primarily driven by higher prices and unit volumes. Adjusted net sales also rose 6,4 percent.
- The segment reported operating segment income of four million USD in the third quarter, compared to 14 million USD in the year-ago period. The decline was primarily due to gains on the termination of commodity contracts in the year-ago period, unfavorable sales mix, higher selling, general and administrative (SG+A) costs and increased MAP spending. Adjusted operating segment income was five million USD, compared to 14 million USD in the prior year.
- Net sales for the first nine months increased 11,3 percent to 1,6 billion USD. Adjusted net sales also increased 11,3 percent.
- Operating segment income for the first nine months was nine million USD, compared to 31 million USD in the first nine months of the prior year, a decrease driven by a 31 million USD charge for a partial withdrawal liability relating to a multi-employer pension plan. Adjusted operating segment income was 40 million USD, compared to 31 million USD in the first nine months of fiscal 2008.
Unit volumes increased 2,5 percent in the third quarter, primarily driven by volume growth for non-branded bakery products due to consumer trade-down to private label breads, as well as the gain of new non-branded business in additional retail stores. In the third quarter, the Sara Lee bread brand was actively supported by coupons, displays and Sara Lee branded merchandise as part of the High School Musical 3 DVD launch. For the first nine months unit volumes increased 4,1 percent.
North American Foodservice
- Net sales of 487 million USD declined 6,7 percent in the third quarter of fiscal 2009, primarily due to lower unit volumes in the soft foodservice market and the divestiture of both the DSD foodservice coffee and the sauces and dressings businesses. Higher prices to cover increased commodity costs partially offset the unit volume decline. Adjusted net sales were down 1,8 percent.
- The segment reported operating segment income of 29 million USD in the third quarter, compared to 32 million USD in the year-ago period. Adjusted operating segment income increased 5,4 percent to 31 million USD in the third quarter, primarily driven by higher prices, procurement and other continuous improvement savings and lower SG+A costs, which were partially offset by higher commodity costs and other inflation.
- Net sales for the first nine months decreased 0,7 percent to 1,6 billion USD. Adjusted net sales rose 2,1 percent.
- The segment reported operating segment income of 16 million USD for the first nine months, compared to 106 million USD in the prior year´s period, a decline driven by a 107 million USD pre-tax, non-cash impairment charge in the second quarter associated with goodwill at the foodservice beverage business. Adjusted operating segment income rose 18,3 percent to 121 million USD in the first nine months of fiscal 2009.
Unit volumes, excluding acquisitions / divestitures, decreased 6,3 percent in the third quarter, as a result of demand softness across all three categories (in example meats, bakery and beverage) as consumers scaled back on out-of-home food consumption during the recession and due to the planned exit of certain low-margin products. Major new foodservice products in the third quarter included Sara Lee individually wrapped desserts, Ball Park ultimate beef hot dogs and Douwe Egberts One Touch Good Origin sustainable liquid coffee. For the first nine months unit volumes decreased 3,9 percent.
International Bakery
- Net sales decreased 23,2 percent to 178 million USD in the third quarter of fiscal 2009, primarily driven by unfavorable foreign currency exchange rates and significantly lower unit volumes. Adjusted net sales decreased 9,1 percent.
- Operating segment income was eleven million USD in the third quarter, down 29,5 percent from 17 million USD in the year-ago period. The decrease was primarily due to lower unit volumes and unfavorable foreign currency exchange rates, which were partially offset by lower SG+A costs. Adjusted operating segment income decreased 17,0 percent to twelve million USD from 15 million USD in the prior year´s period.
- Net sales for the first nine months of fiscal 2009 decreased 12,1 percent to 603 million USD. Adjusted net sales decreased 5,7 percent.
- The segment reported operating segment income of seven million USD for the first nine months of fiscal 2009, compared to 39 million USD for the year-ago period. Adjusted operating segment income for the first nine months was 37 million USD, compared to 46 million USD for the prior year´s period.
Unit volumes, excluding acquisitions / divestitures, decreased 12,5 percent in the third quarter, primarily resulting from weak unit volumes in Spain as consumers traded down to private label breads in the very challenging economy, loss of business to a large customer and lower refrigerated dough exports. New product launches included Bimbo tender wheat bread in Spain and Portugal. For the first nine months unit volumes decreased 11,7 percent.
Info: More details are available in «Sara Lee Reports Strong Operating Income in Third Quarter Of Fiscal 2009» – complete press release (PDF / 17 pages / 374 KB).
