Del Monte Foods reported net sales for the first quarter fiscal 2014 of $823.9 million compared to $821.1 million for the three months ended July 29, 2012, an increase of 0.3 percent. The increase was driven by list pricing actions net of trade spend (net pricing), primarily in Pet, largely offset by volume declines for existing products (including pricing elasticity). In addition, sales associated with the acquisition of Natural Balance Pet Foods, Inc. (Natural Balance) in mid-July contributed to the increase in net sales.
Operating income increased 87.3 percent from $45.8 million in the prior year period to $85.8 million. The increase was driven by factors similar to net sales as noted above, in addition to lower selling, general and administrative expense (SG&A) and decreased costs associated with the closure of the Kingsburg, California facility.
Adjusted earnings before interest, taxes and amortization (EBITDA) increased 22.8 percent to $139.5 million compared to $113.6 million in the prior year period. The drivers of Adjusted EBITDA are similar to those of operating income, except for the cash impact of hedge positions, which was less favorable compared to the prior year. In calculating Adjusted EBITDA, the adjustment for the cash impact from economic hedge positions are calculated pursuant to the company’s 7.625 percent notes Indenture and credit agreements.
“The company delivered a solid increase in profitability during the quarter,” said Dave West, CEO of Del Monte Foods, in a prepared statement. “In Pet, the business continues to grow amidst a tough competitive environment. In Consumer, we faced challenges driven by fruit supply constraints and the continued economic issues in Venezuela. We remain focused on generating long-term growth by investing behind our brands, as well as driving strong innovation and new go-to-market capabilities. We completed the Natural Balance acquisition and are excited to further expand in the pet independent and specialty channels, consistent with our long-term growth strategy. We also successfully launched Fruit Burst Squeezers, our first consumer products platform innovation since we restaged the Del Monte brand.”