ConAgra Foods, Inc., one of North America’s leading packaged food companies, reported results for the fiscal 2013 second quarter ended Nov. 25, 2012. Diluted earnings per share (EPS) from continuing operations was $0.51 in the fiscal second quarter, up 19 percent over $0.43 earned in the year-ago period. Excluding $0.06 of net expense in both the current quarter and the year-ago period from items impacting comparability, current quarter EPS of $0.57 was 16 percent above the comparable $0.49 earned in the year-ago period.
Gary Rodkin, ConAgra Foods’ chief executive officer, said in a prepared statement, “We are pleased that both of our segments posted operating profit growth in the midst of current economic conditions. Effective margin management initiatives, moderating input cost inflation, the benefit of acquisitions, and good results from our potato operations are collectively driving high-quality EPS growth. We are very excited about the pending acquisition of Ralcorp, which we announced on Nov. 27, 2012, given the strategically and financially compelling nature of the acquisition. The acquisition is expected to close in the first quarter of calendar 2013, and we look forward to updating our investors on the financial benefits of the acquisition in due course.”
The Consumer Foods segment posted sales of $2,423 million and operating profit of $286 million for the second quarter. Sales increased 11 percent, reflecting 11 percent contribution from acquisitions, 4 percent favorable price/mix, and a 4 percent organic volume decline. Sequentially, organic volume improved by a slight amount (on an unrounded basis). Brands posting sales growth for the quarter include Act II, Hebrew National, Marie Callender’s, Orville Redenbacher’s, Reddi-wip, Ro*Tel, Wesson, and others.
Operating profit of $286 million grew 12 percent over $256 million in the year-ago period, as reported. After adjusting for $7 million of net expense in the current period, and $15 million of net expense in the year-ago period, from items impacting comparability, current-quarter operating profit of $293 million increased 8 percent over the comparable $271 million a year ago. Marketing investment for the base business (excluding recently completed acquisitions) increased 18 percent, reflecting the company’s planned commitment to building long-term brand strength. Operating profit growth was driven by a combination of favorable price/mix and other margin management initiatives, moderating inflation, and contribution from completed acquisitions.
The company currently expects full fiscal year productivity savings to exceed $250 million for this segment and for input cost inflation to be approximately 2-3 percent.
Sales for the Commercial Foods segment were $1,312 million, 5 percent above year-ago period amounts. The growth primarily reflects favorable price/mix and good volumes for the Lamb Weston potato operations, which posted notable success in international markets. To a lesser extent, the sales growth also reflects the pass-through of higher wheat costs in terms of higher flour prices for the milling operations. The overall segment remains focused on top-line growth through innovation, improving product mix with higher-margin items, and strong alignment with high-potential customers.
Segment operating profit was $169 million, 5 percent above year-ago period amounts as reported, reflecting the sales growth as well as a continued focus on productivity and cost-saving initiatives. Lamb Weston drove the overall segment’s profit growth, while flour milling profits were below year-ago period amounts, as planned, due to the very strong performance in the same period a year ago.
