CHICAGO--(BUSINESS WIRE)-- Conagra Brands, Inc. reported results for the fiscal 2017 second quarter ended November 27, 2016.
Highlights
(all comparisons are against the year ago period, unless otherwise noted)
- Diluted EPS from continuing operations grew 44.4% from $0.18 to $0.26; adjusted diluted EPS from continuing operations grew 25.6% to $0.49, despite the inclusion of Spicetec Flavors and Seasoning and JM Swank in the prior year.
o “Adjusted” financial measures exclude the comparability items summarized at the end of this release and are non-GAAP. Please see the end of this release for reconciliations to the most directlycomparable GAAP measures.
- Net sales decreased 11.5%, largely driven by the Company’s continued progress in building a higher quality revenue base. The Company estimates that the impacts of divestitures and foreign exchange lowered sales by 5.5%.
- Gross margin (net sales less cost of goods sold as a percent of net sales) expanded 270 basis points, and adjusted gross margin expanded 250 basis points.
- The Company completed the spin-off of Lamb Weston in the quarter. Lamb Weston has been re-classified as discontinued operations for all periods presented.
CEO Perspective
Sean Connolly, president and chief executive officer of Conagra Brands, commented, “We are successfully reshaping our portfolio, capabilities, and culture. Our increased focus and discipline on driving value over volume are enabling us to expand our margins as we build a higher-quality revenue base, improve efficiency, and deliver stronger, more consistent performance.”
He added, “We expect to improve sales growth trends in the second half of the fiscal year as we begin to lap the pricing and trade actions we undertook last year. Accordingly, we are reaffirming the fiscal 2017 guidance we provided at our investor day on Oct. 18, 2016.”
Total Company Results
Net sales decreased 11.5% as a result of volume declines associated with the Company’s actions to build a higher quality revenue base, divestitures, and foreign exchange. The Company estimates that the impacts of divestitures and foreign exchange lowered sales by 5.5%.
As a percentage of net sales, gross profit increased 270 basis points from 28.3% to 31.0%. Adjusted gross profit as a percentage of net sales increased 250 basis points to 31.1%. The increases were driven primarily by improved price/mix, supply chain productivity, input cost favorability, and an inventory write-down in the prior year associated with exiting a non-core business in the Foodservice segment. These benefits more than offset the decline in volume and negative effects of foreign exchange.
Diluted EPS from continuing operations increased 44.4% from $0.18 to $0.26, and adjusted diluted EPS from continuing operations increased 25.6% to $0.49. The growth reflects lower selling, general, and administrative (SG&A) expenses associated with cost savings programs and the timing of planned expenses, and lower interest expense as a result of debt reduction. These benefits were partially offset by volume declines and the inclusion of Spicetec and JM Swank in the prior year period.
Grocery & Snacks Segment
Net sales for the segment decreased 6% to $854 million. More disciplined pricing and trade promotion practices resulted in price/mix increasing 1% while volume declined 7%.
Operating profit for the segment increased 19%, and adjusted operating profit increased 18%, reflecting strong margin expansion in the quarter. Continued discipline on pricing and trade promotion, supply chain productivity, favorable input costs, and the benefits of our cost savings efforts more than offset decreased sales.
Foodservice Segment
Net sales for the segment decreased 1% to $283 million. Volume was flat to the prior year’s quarter while price/mix decreased 1%.
Operating profit for the segment grew 56% as the business wrote down inventory in the prior year while exiting a non-core business. The Company estimates that the impact from the exited business added 52 percentage points to segment operating profit growth. Full report.
