This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Del Monte Foods Co. (DLM) on June 5, 2008.
Management:
-
Chairman, Chief Executive Officer: Rick Wolford
-
Chief Financial Officer: Dave Meyers
-
Senior Vice President Finance and Investor Relations: Larry Bodner
Key Investors Issues
- Net sales were $1.04 billion compared to $940.1 million last year, an increase of 11.1%.
- Income from continuing operations was $49.8 million or 25 cents per share, up 35% from $36.8 million, or 18 cents a share in 2007.
- The firm sharpens its brand-driven strategic plan.
Full Year Highlights:
- The company reported net sales of $3.7 billion compared to $3.4 billion in 2007, an increase of 9.4%.
- Income from continuing operations was $133.3 million, or 66 cents a share, up 18%.
- Cash provided by operating activities, less cash used in investing activities was $207.2 million.
Fourth Quarter Highlights
Net sales was $1.04 billion compared to $940.1 million last year, an increase of 11.1% driven primarily by existing volume growth across the business as well as net pricing and new product growth.
- The full benefit from the top line growth more than offset continued operational and other cost pressures.
- In the seafood business, the firm drove incremental, low margin sales in seafood as it gained share based on solid end-market execution.
- The firm has $207 million of cash flow which was above guidance primarily due to stronger working capital management, particularly the favorable timing of tax payments, related incremental pension payments and NOL’s.
- Gross margin was 24.1%, a decrease of 110 basis points versus last year as net pricing drove a 3.3 point increase.
However, higher commodity and ingredient costs including grains, fats, oils and meats in addition to higher fish and energy costs drove a negative 4.6 points of margin contraction.
- Income from continuing operations was $49.8 million, or 25 cents per share, up 35% from $36.8 million, or 18 cents a share in 2007 on revenue growth and lower transformation-related and integration expenses.
- Operating income increased 18.3% with operating margins increasing 60 basis points driven by the $15 million increase in gross profit and lower SG&A.
- The $1 million SG&A reduction was driven primarily by the insurance proceeds related to the pet recall and the absence of case or arbitration costs incurred in this quarter.
The $110 million of transformation investments are now complete and the firm is on track to deliver $50 million in run rate savings in fiscal 2009.
- Interest expense was $7 million lower primarily driven by lower interest rates as well as lower debt with debt levels decreasing by $110 million from $2 billion to $1.89 billion.
- The firm spent $30 million on capital projects versus $44 million a year ago due primarily to lower transformation investments.
Segment Highlights:
-
Consumer Products net sales were $642.4 million, an increase of 8.0% from net sales of $594.9 million in the prior year period.
- The increase in Consumer Products net sales was driven primarily by new products, existing volume growth, and pricing actions.
- Fruit was particularly strong driven by new products and customer buyforward ahead of the April 2008 Fruit price advance, and StarKist seafood and College Inn broth also contributed to the sales growth. V
Vegetable sales declined, as expected, due to a third quarter buyforward ahead of the January 2008 price increase.
- Operating income increased 27.3% from $39.6 million in 2007 to $50.4 million due to the positive impact from the topline mentioned above was partially offset by higher costs, primarily fish costs as well as energy, logistics and transportation-related costs.
- Also contributing to the increase in operating income was the absence of the Pacer arbitration decision.
The firm continued to leverage the Del Monte mega brand equity into new areas including shelf stable healthy deserts with Fruit Chillers and microwaveable meals with Harvest Selections.
- It further expanded upon its leading position in packaged produce with the introduction of additional Fruit Natural flavors.
- In seafood the extreme increases in fish costs since spring 2007 have outpaced the category’s ability to be matched with price increases.
- Cost pressures continued across the consumer business primarily in fish as well as in energy and transportation related costs.
- Fish costs remain high driven by poor catch rates and higher fuel costs.
