ConAgra Foods, Inc. reported results for the fiscal 2012 third quarter ended Feb. 26, 2012. Diluted earnings per share (EPS) from continuing operations was $0.65 as reported, up 25 percent over $0.52 a year ago. After adjusting for $0.14 of net EPS benefit in the current quarter, and $0.02 of net EPS benefit in the year-ago period, from items impacting comparability, diluted EPS of $0.51 from continuing operations in the fiscal third quarter increased 2 percent over the comparable $0.50 in the year-ago period.
Gary Rodkin, ConAgra Foods’ chief executive officer, commented in a prepared statement, “Conditions have been difficult across the industry due to high inflation and soft volumes for retail consumer food brands. Our Lamb Weston potato business performed well, and we benefited from total margin management efforts that include price increases in both operating segments and good overall cost savings. We remain committed to our EPS goals for fiscal 2012, and we will continue our focus on deploying cash in ways that create long-term value.”
The consumer foods segment posted sales of $2,157 million for the fiscal third quarter, up 4 percent year over year; the sales increase reflects a 5 percent contribution from favorable price/mix, a 5 percent organic volume decline, and a 4 percent contribution from recent acquisitions. The 5 percent organic volume decline reflects challenging industry conditions and the company’s additional recent price increases.
Brands posting sales growth for the quarter include ACT II, Chef Boyardee, DAVID, Marie Callender’s, Orville Redenbacher’s, PAM, Peter Pan, Reddi-wip, Slim Jim, Wesson, and others.
Fiscal third-quarter sales for this segment include sales for the recently acquired National Pretzel Co., as well as amounts for Agro Tech Foods, Ltd. of India, in which the company recently increased its ownership to a majority interest and which the company now consolidates for financial statement reporting purposes.
Operating profit of $331 million was 20 percent above $276 million a year ago, as reported. Current-quarter amounts include $59 million of gain resulting from the recent acquisition of a majority interest in Agro Tech Foods, Ltd., as well as approximately $8 million of restructuring costs. Prior-year amounts include approximately $22 million of restructuring costs. After adjusting for these items, current-quarter segment operating profit declined 6 percent from comparable amounts last year due to very high input cost inflation. As expected, input cost inflation in the fiscal third quarter was the most severe of any this fiscal year, at 11 percent, and more than offset the benefit of strong price and cost-oriented margin management initiatives as well as profit contribution from recent acquisitions. Despite difficult industry conditions that have softened the near-term outlook for this segment, the company expects modest comparable year-over-year profit growth for this segment in the fiscal fourth quarter largely due to an expected slowdown in the rate of inflation.
Fiscal third-quarter sales for the commercial foods segment were $1,216 million, 14 percent above year-ago amounts. The sales growth reflects the benefit of commodity-driven price increases and increased volumes for the Lamb Weston potato operations, as well as the pass-through of higher wheat costs in the milling operations. Other product lines in the segment posted good top-line results.
The segment’s operating profit increased 7 percent to $150 million as reported; after adjusting for $10 million of restructuring charges in prior-year amounts, current-quarter operating profit was essentially in line with comparable year-ago amounts. Lamb Weston improved profit performance through pricing actions, volume growth, and productivity gains, which collectively offset a profit decline in the milling operations. The profit decline for the milling operations was driven by a difficult comparison given a very strong performance in the year-ago period, as well as less favorable market conditions. Improved mix, notably through sales growth for sweet potatoes and whole grains, favorably impacted segment results.
The company expects this segment to post strong profit growth in the fourth quarter of the fiscal year given pricing actions already taken, momentum with potato volumes, and the nature of the quarterly comparison.
