ConAgra Foods, Inc., highlights fiscal 2013 first-quarter results. Diluted earnings per share (EPS) from continuing operations up 177 percent as reported and up 42 percent on a comparable basis. Consumer Foods' operating profit increased 20 percent as reported and 14 percent on a comparable basis. Commercial Foods' operating profit grew 43 percent as reported and 37 percent on a comparable basis and the company continues to expect operating cash flow in excess of $1.2 billion for the fiscal year.
ConAgra Foods, Inc. reported results for the fiscal 2013 first quarter ended Aug. 26, 2012. Diluted earnings per share (EPS) from continuing operations was $0.61 in the current quarter, up 177 percent over $0.22 earned in the year-ago period. Excluding $0.17 of net benefit in the current quarter and $0.09 of net expense in the year-ago period from items impacting comparability, current quarter comparable EPS of $0.44 was 42 percent above the comparable $0.31 earned in the year-ago period.
Gary Rodkin, ConAgra Foods' chief executive officer, said in a prepared statement, "We are very pleased with our strong start to fiscal 2013. Based on continued momentum in our potato operations, effective margin management initiatives across the portfolio, and contribution from acquisitions, we are able to post a strong EPS performance in the midst of difficult marketplace conditions. It is clear that our operating capabilities, strategic initiatives, and prudent capital allocation are accelerating EPS performance. We have raised our EPS expectations for fiscal 2013 while continuing to make strong levels of marketing investment as part of long-term brand building initiatives."
Consumer Foods Segment (62 percent of first-quarter sales)
The Consumer Foods segment posted sales of $2,043 million and operating profit of $235 million for the first quarter. Sales increased 8 percent, reflecting 8 percent contribution from acquisitions, 5 percent favorable price/mix, and a 4 percent organic volume decline. Foreign exchange rates negatively impacted sales by 1 percent.
Brands posting sales growth for the quarter include ACT II, Lightlife, Marie Callender's, Orville Redenbacher's, PAM, Peter Pan, Reddi-wip, Ro*Tel, Rosarita, Slim Jim, Wesson, and others.
Operating profit of $235 million grew 20 percent over $196 million in the year-ago period, as reported. After adjusting for $7 million of net expense in the current period, and $16 million of net expense a year ago, from items impacting comparability, current-quarter operating profit of $242 million increased 14 percent over the comparable $212 million a year ago. Marketing investment increased at a double-digit rate, as planned, reflecting the company's commitment to building long-term brand strength. Operating profit growth reflects success with margin management initiatives (notably, price increases necessitated by inflation, and productivity programs that target in excess of $240 million of cost savings this fiscal year), as well as less severe inflation (approximately 3 percent of cost of goods sold this quarter), contribution from acquisitions, and favorable product mix.
Despite the recent increase in many commodities prices, net inflation for the Consumer Foods segment is expected to be slightly lower than originally planned; this reflects the company's effective procurement and hedging programs as well as the nature of the company's raw input needs. The segment's year-over-year volume performance is expected to improve throughout the fiscal year as the company laps the volume impact of price increases taken in fiscal 2012; the segment's innovation pipeline and increased marketing investment are expected to contribute to sequentially improved volume performance as the fiscal year progresses.
Commercial Foods Segment (38 percent of first-quarter sales)
Sales for the Commercial Foods segment were $1,269 million, 5 percent above year-ago amounts. The sales increase was due to a strong top-line performance for the Lamb Weston potato operations, which posted good volume growth, particularly in international markets, as well as favorable price/mix. All of the segment's product lines posted volume growth.
Segment operating profit was $140 million, 43 percent above year-ago amounts as reported. After adjusting for $4 million of net expense from items impacting comparability in the year-ago period, current quarter profits increased 37 percent on a comparable basis. Lamb Weston's potato operations drove the segment's profit growth due to strong sales and a focus on operating efficiencies; international results for Lamb Weston were notably strong. Flour milling profits were in line with year-ago amounts.
Fiscal 2013 EPS Outlook
Based on the strong start to the fiscal year, the company now expects fiscal 2013 diluted EPS to be in the range of $2.03 - $2.06, adjusted for items impacting comparability.
The company expects its operating capabilities, strategic initiatives, and prudent capital allocation to continue to drive good underlying performance for the remainder of fiscal 2013. Relative to the strong comparable year-over-year EPS growth rate posted for the fiscal first quarter, the remaining fiscal quarters of fiscal 2013 are expected to show more modest rates of comparable year-over-year EPS growth, reflecting more difficult year-over-year comparisons as well as continued increases in marketing investment.