Sara Lee Corp. Reports 8 Percent Net Sales Gain In Fourth Quarter

Sara Lee Corp. reported earnings for the fourth quarter and full year fiscal 2011 and provided an update on the progress of the spin off transaction.

Srategic highlights include:

• Significant divestment and restructuring progress towards the creation of two pure-play companies by the first half of calendar 2012;
• Intend to divest Spanish bakery and French refrigerated dough businesses;
• Signed agreement to sell North American refrigerated dough business to Ralcorp for $545 million;
• Corporate expenses nearly $100 million lower than fiscal 2010

Fourth quarter highlights:

• 8 percent increase in adjusted net sales from continuing operations to $2.3 billion; 9 percent reported net sales increase;
• 40 percent increase in adjusted operating income to $189 million; reported operating income increase of 19 percent.

"During the last six months, we have made significant strides toward creating two pure-play companies which are poised for success,” said Sara Lee Executive Chairman Jan Bennink in a prepared statement.

“Our objective of building two simpler, faster and more entrepreneurial businesses is being realized. We have defined the organizational framework for our new companies and are continuing to build and restructure our teams for the future. Through our strategic divestments, we are achieving our objective of streamlining the portfolios to provide the best foundation for strong and focused businesses moving forward. We are heartened by the fact that we have been able to deliver solid results for fiscal 2011 while managing difficult commodity conditions and the internal challenges of the spin off. The inherent strength of these two businesses, combined with a new focus and orientation, give me confidence that the two companies will be highly successful when they separate in the first half of calendar 2012."

Chief Executive Officer Marcel Smits added, “Throughout fiscal 2011, our businesses have remained focused on operational performance. We delivered our updated guidance for adjusted EPS, adjusted operating income and net sales. We’ve also maintained a focus on cost reduction activities, lowering our corporate expenses by nearly $100 million over our prior fiscal year. We have introduced new products like Jimmy Dean Jimmy D’s and expanded successful brands like L’OR EspressO and Senseo into new geographies. I’m excited about the progress that we have made this year and continue to have great confidence in the long-term prospects of our businesses.”

The company continues to streamline operations as it progresses toward the spin off. The summary below provides an update on the decisions made to date.

On Aug. 9, the company announced a signed agreement to sell its North American refrigerated dough (Store Brands) business to Ralcorp for $545 million. The sale is expected to close by the end of calendar year 2011. This business was classified as a discontinued operation in the fourth quarter of fiscal 2011.

The sale of the North American Fresh Bakery to Grupo Bimbo is expected to close before the end of September.

Sara Lee decided in August to divest the Spanish bakery and French refrigerated dough businesses. For both, a sales process is underway and numerous bids have been received. These businesses will be reclassified to discontinued operations in the first quarter of fiscal 2012. The Australian frozen desserts business remains under strategic review.

The North American Retail segment reported a 4 percent increase in adjusted net sales to $715 million, primarily driven by pricing actions. The segment reported strong new product performance with growth from Jimmy Dean Jimmy D's and Hearty Crumbles, and Hillshire Farm Low Sodium and Family Size. Ball Park maintained its share leadership behind the successful introduction of New York Deli Style Beef Franks. These launches were more than offset by the negative volume impact from early pricing actions taken to offset commodity cost increases and the rationalization of lower margin promotional programs. Mix was marginally positive. On a reported basis, net sales declined 2 percent largely due to last year’s 53rd week.