ConAgra Foods, Inc. (CAG)
Q3 2009 Earnings Call Transcript
March 26, 2009 9:30 a.m. ET

Executives

Gary M. Rodkin – President, Chief Executive Officer & Director
Christopher W. Klinefelter – Vice President of Investor Relations
John F. Gehring – Chief Financial Officer & Executive Vice President
André J. Hawaux – President of Consumer Foods
Robert F. Sharpe, Jr. - President of Commercial Foods & Executive Vice President of External Affairs

Analysts

David Driscoll - Citi Investment Research
Andrew Lazar - Barclays Capital
Terry Bivens – JPMorgan
Eric Katzman - Deutsche Bank
David Palmer – UBS
Bill Leach - TIAA-CREF
Christopher Growe - Stifel Nicolaus & Co.
Robert Moskow - Credit Suisse
Alexia Howard - Sanford C. Bernstein & Co.

Presentation

Operator

Good morning and welcome to today''s ConAgra Foods third quarter earnings conference call. This program is being recorded. My name is John Daniels and I will be your conference facilitator. All audience lines are currently in a listen-only mode. However, our speakers will address your questions at the end of the presentation during the formal question-and-answer session.

At this time, I''d like to introduce your host for today''s program, Gary Rodkin, Chief Executive Officer of ConAgra Foods. Please go ahead, Mr. Rodkin.

Gary M. Rodkin

Thank you. Good morning. This is Gary Rodkin and I''m here with John Gehring, our CFO, André Hawaux, President of our Consumer Foods section, Rob Sharpe, President of our Commercial segment and EVP of External Affairs, and Chris Klinefelter, VP of Investor Relations.

Over the next few minutes John and I will provide our views about the strategic, operating and financial aspects of the quarter, but before we get started Chris will say a few words about housekeeping matters.

Christopher W. Klinefelter

Good morning. During today''s remarks we will make some forward-looking statements and while we''re making those statements in good faith and are confident about our company''s direction, we do not have any guarantee about the results that we will achieve, so if you''d like to learn more about the risks and factors that could influence and affect our business, I''ll refer you to the documents we file with the SEC, which include cautionary language.

Also, we''ll be discussing some non-GAAP financial measures during the call today, and the reconciliations of those measures for Regulation G compliance can be found in either the earnings press release or on our website under the Financial Reports and Filings link and in choosing Non-GAAP Reconciliations.

Now I''ll turn it back over to Gary.

Gary M. Rodkin

Thanks, Chris, and good morning, everyone. I''m pleased to reconfirm our earnings outlook for fiscal 2009 of slightly above $1.50 per share on a comparable basis. The third quarter''s overall EPS performance of $0.43, as reported, and $0.40 on a comparable basis came in a little stronger than expected, particularly in Consumer Foods, and we believe that our stronger foundation in that segment, along with what we''re seeing internally and in the market supports our full-year outlook.

We saw increasing strength in our Consumer Foods business this quarter, as we expected, with sales and comparable operating profits ahead of last year. We''re turning the corner in this business. The steps we''ve taken the past few years are starting to pay off, inflation is moderating, and we expect year-over-year operating profit growth to be stronger in Q4. At the same time, our Commercial businesses are delivering solid performance. The segment was below year-ago amounts only because of the tough comparison with last year''s third quarter, when we posted exceptionally high profits driven by volatile weak markets. We''re also continuing to see good, controllable cost performance across the company, both in our supply chain and on SG&A efficiencies, and this is benefiting both segments.

Let me go through some of the segment highlights of the quarter. Consumer Foods had a good quarter. Our business outside of measured channels continues to be very strong. Those channels are the fastest growing segments and now are about half our business. And while we''ve grown share in measured channels for some of our brands, like Chef Boyardee, Hebrew National and Snack Pack Pudding, we expect our share performance in the mainstream grocery channel to improve across a broader range of brands over the next few quarters. Overall, Consumer Food sales were up 5% on a comparable basis, with about 10% positive contribution from price and mix, volume down about 4%, and a 1% negative impact from foreign exchange. Operating profit was up 12%, as reported, and 6% on a comparable basis.