ConAgra 3Q profit down, adjusted results beat view
ConAgra 3rd-quarter earnings fall 38 pct; adjusted profit beats view as revenue rises
Emily Fredrix, AP Food Industry Writer
Thursday March 26, 2009, 10:14 am EDT
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MILWAUKEE (AP) -- ConAgra Foods Inc., which makes foods under the Healthy Choice and Peter Pan brands, said Thursday that its third-quarter profit fell 38 percent but adjusted results beat expectations as sales in its main food business rose.
AP - In this Sept. 18, 2008 file photo, ConAgra products are showcased in the lobby of ConAgra Foods world ...
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CAG 16.56 +1.00
{"s" : "cag","k" : "c10,l10,p20,t10","o" : "","j" : ""} The Omaha, Neb.-based company also reiterated its earnings forecast for the year.
Shares rose 52 cents, or 3.3 percent, to $16.08 in morning trading Thursday.
ConAgra earned $193.2 million, or 43 cents a share, for the three months ended Feb. 22, down from $309.1 million, or 63 cents a share, a year ago. The results for last year's third quarter included income from a commodity trading business that has since been sold.
Excluding one-time items, the company said it earned 40 cents per share. That tops the 36 cents a share expected by analysts polled by Thomson Reuters, who generally exclude one-time items.
The commodity trading business, which was sold in June 2008, added 29 cents per share to results in the same period a year earlier. Excluding income from that unit, profit was 43 cents per share.
Revenue rose 6 percent to $3.13 billion from $2.96 billion a year ago. The bulk of the company's sales came from its consumer food segment, where revenue rose 4.8 percent to $2.01 billion, from $1.92 billion in the same period last year.
The consumer foods segment, which includes brands like Banquet and Marie Callender, had a 10 percent boost in revenue from pricing and mix -- meaning people bought more expensive products. But that was partially offset by a 4 percent drop in unit volume as brands like ACT II popcorn and Peter Pan peanut butter saw volume drops.
Sales of Peter Pan were hurt in part due to a slump in the category as consumers worried about a salmonella outbreak linked to peanut butter, even though jars of peanut butter were largely uninvolved in the recall.
ConAgra said it eliminated low-margin business in the ACT II popcorn line to focus on higher-margin Orville Redenbacher's popcorn, so volume tumbled there as well.
As consumers pull back on their food spending, they're eating more from grocery stores rather than restaurants. But they're also trading down to less-expensive products to save money, so food companies are shedding unprofitable businesses and focusing on the ones with stronger profit margins.
Chief Executive Gary Rodkin said consumers are feeling pressure as they grapple with the recession but the company's mix of lower-priced foods and higher-priced ones that provide convenience, like frozen foods, are still things shoppers want.
"Clearly we all know that the consumer is holding on to their dollars pretty tightly and is extremely value conscious," he told analysts on a conference call. "But again I think that's where we've got a portfolio that plays pretty well to that."
Revenue in ConAgra's consumer foods unit was also hurt by 1 percent due to the drag of foreign currency. The U.S. dollar gains strength, that weighs on businesses with overseas sales.
Profit in the segment rose 6 percent compared to the previous year. Input cost inflation -- reflecting higher costs for ingredients and energy -- was $140 million, a 10 percent rise from the same period last year. The company called that "significant, but less intense than in recent quarters."
Food companies have been hurting due to high costs for fuel oil and ingredients like corn and wheat, but those costs have been moderating from record highs reached last summer. They have been raising prices to recoup higher costs. ConAgra also said it saved more than it expected in its supply chain and had lower operating expenses.
The company told analysts on a call that it expects fourth-quarter inflation of the low single digits, slower than the double-digit growth the company has seen in recent quarters.
ConAgra reiterated that fiscal 2009 profit would be "slightly above $1.50" per share. Analysts had predicted the company would earn $1.47 per share in the fiscal year, which ends in May.
AP Business Writer Vinnee Tong in New York contributed to this report.
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