Sara Lee: Reports Solid Start to the Year

Downers Grove / IL. (slc) Sara Lee Corporation reported earnings for the first quarter and updated the progress of the spin-off of the company´s international coffee+tea business. First Quarter Highlights (continuing operations):

• Adjusted net sales increased six percent and adjusted operating income increased four percent; reported net sales increased 13 percent while reported operating income declined 29 percent
  • Meat adjusted net sales declined 0,6 percent and adjusted operating segment income declined four percent; reported net sales increased two percent and reported operating segment income declined 17 percent
  • Coffee + Tea adjusted net sales increased 14 percent and adjusted operating segment income increased 20 percent; reported net sales and operating segment income increased 27 percent and 26 percent, respectively
• Total MAP spend up 27 percent, with both Meat and Coffee+Tea showing significant increases
• Adjusted EPS increased 0,06 USD to 0,18 USD; reported EPS decreased 0,15 USD to (0,06 USD)
• Reaffirm full year adjusted EPS guidance of 0,89 USD to 0,95 USD, despite headwinds from unfavourable foreign currency exchange rates and the reclassification of N.A. Foodservice Beverage as a discontinued operation

Perspectives from Executive Chairman + Chief Executive Officer

«We are moving forward aggressively, preparing our Meat and Coffee+Tea businesses for strong futures as independent pure-play companies», said Sara Lee Executive Chairman, Jan Bennink. «Within the past month we have closed the sale of North American refrigerated dough to Ralcorp and announced the sales of Spanish bakery to Grupo Bimbo and the majority of the North American foodservice beverage operations to J.M. Smucker. We have also gained DOJ approval on the North American Fresh Bakery sale to Grupo Bimbo. These actions demonstrate our progress toward the creation of two focused entities that are poised for long-term growth. Meanwhile, we are increasing our investment in the future, with strong support behind core brands and new product development. The solid performance of our base business and our exciting pipeline of innovation give me great confidence that both companies are positioned for successful futures».

Chief Executive Officer Marcel Smits added: «We are pleased with the solid top and bottom line performances of our businesses while facing the challenge of managing volume and margins in an environment of commodity inflation and weak macroeconomic conditions. The Coffee+Tea business showed strong progress, with double-digit top and bottom line growth and margin expansion despite a healthy increase in marketing investment. In North America, we have invested heavily behind new product launches, implemented organizational changes and achieved further cost reductions. For Sara Lee as a whole, we are on track to achieve our goal of 180 to 200 million USD in cost savings. All of these initiatives taken together give us confidence for the remainder of the year and allow us to maintain our EPS guidance despite a currency headwind and the exclusion of our N.A. Foodservice Beverage business from continuing operations».

North American Foodservice + Specialty Meats

The newly-named North American Foodservice + Specialty Meats segment is comprised of the North American foodservice meats and bakery businesses (the beverage business is now reported as a discontinued operation) and the company´s specialty meats business, currently consisting of Aidells and Gallo. The results for Aidells and Gallo previously had been included in North American Retail.

The North American Foodservice + Specialty Meats segment reported another quarter of solid top-line growth. Adjusted net sales increased two percent to 280 million USD, driven largely by pricing actions taken across the portfolio, while volumes increased two percent, including the contribution from the Aidells acquisition. Excluding Aidells, volumes declined two percent versus a strong prior year quarter driven by soft restaurant traffic and declines in foodservice bakery. Reported net sales grew by twelve percent, largely driven by strong performance from Aidells, which outperformed expectations with double-digit volume and sales growth.

Adjusted operating segment income increased seven percent to 27 million USD driven by manufacturing and SG+A savings. The adjusted operating margin expanded 40 basis points over the prior year to 9,6 percent. Reported operating segment income grew 16 percent while the reported operating margin also increased 40 basis points to 8,9 percent.

Australian Bakery

The former International Bakery segment is now made up of only Australian Bakery as the operations in Spain and France have been moved to discontinued operations.