This summary is based on the fourth quarter earnings call conducted by ConAgra Foods Inc. (CAG) on June 26, 2008.
Management:
-
Chief Executive Officer: Gary Rodkin
-
Vice President, Investor Relations: Chris Klinefelter
-
Chief Financial Officer: Andre Hawaux
-
President, Food and Ingredients, Executive Vice President, External Affairs: Rob Sharpe
Key Investors Issues
- Sales were up 16% to $3.08 billion from $2.67 billion in the prior year.
- Net income rose 4.8% to $201.3 million or 41 cents a share, from $192 million or 39 cents a share in 2007.
- The firm paid dividends of $93 million during the period.
Full Year Highlights:
- Sales were up 10.2% to $11.6 billion from $10.5 billion in 2007.
- Net income increased 21.7% from $764.6 billion or 96 cents a share in the prior year to $930.6 million or $1.09 a share.
Fourth Quarter Highlights
Sales increased 15.5% to $3.08 billion from $2.67 billion in the prior year due to strong growth in food and ingredients, up 32%.
- The firm lost two-tenths of a share point in IRI-measured channels for the 12 weeks ending 5/25/2008, driven by pricing and merchandising actions.
- The pricing and merchandising actions were an absolute must in order to rebuild margin, invest in the brands, and fight inflation.
- The supply chain delivered another $60 million in cost savings in the quarter and $240 million for the full year.
Net income rose by 4.8% to $201.3 million or 41 cents a share, from $192 million or 39 cents a share in 2007 on revenue growth.
- Selling and general administration expenses improved 8% to $469 million from $510 million in the prior year.
- Interest expense was $70 million, higher than last year due to the need to finance working capital.
- Capex was $128 million, less than a year ago, strictly due to timing.
- Dividends were $93 million, slightly above last year''s amount due to an increase in the dividend and the firm repurchased $100 million of stock and plans on bringing fiscal year 2008 repurchases to $188 million.
Segment Highlights:
-
Consumer Foods posted sales of $1.7 billion and operating profit of $167 million for the quarter.
- Profits showed good sequential improvement due to pricing actions as the firm implemented pricing across 95% of the portfolio, defraying some of the intense input cost inflation we have been experiencing.
- Together with marketing driven success and demonstrated traction and innovation, this delivered improved trends.
- Overall pricing contributed 5% growth to the Consumer Foods top line in this quarter while volume dropped 1%.
A number of major brands performed well, including Chef Boyardee, Hebrew National, Hunt''s, Orville Redenbacher, and Snack Pack.
- Overall, market shares were solid for many of the brands, but there are a few areas where the firm focused on inroads by private label where they are the primary competition, like Pam cooking spray, Reddi-Wip, and Egg Beaters.
- Growth in non-measured channels was much stronger than growth in measured channels as consumers continue to shift their shopping habits.
- The firm will continue to improve its marketing and sales efforts with a big focus on ROI, particularly the advertising and in-store execution, improving effectiveness of the spend over time.
Comparable sales for priority investment brands were up 4% as reported and up 2% on a comparable basis.
- It did sacrifice some volume, particularly in frozen, to get the net pricing to levels dictated by continuing inflation.
- Rebuilding the profitability through list pricing and trade spend reductions has cost some short-term market share but the firm believes it is the right trade-off in the face of continuing input cost pressures.
- The firm has begun the introduction of Healthy Choice Asian Steamers, which brings restaurant quality to the frozen case, unlike anything currently available.
The enabler brands grew by 9%, taking significant pricing to cover dramatic increases in cost of goods like vegetable oil as volume was down only 1% as value-oriented products held their own in the market.
- The firm will have a number of other major launches across fiscal 2009, some in frozen but in other categories as well.
- ConAgra announced a deal with P&G, which is a 10 year renewable license and capability agreement including nutrition, food and packaging technologies.
