US food company Campbell Soup has reported higher net earnings for the third quarter but said it needs to address the decline in its operating margins.

The company posted net earnings of US$142m, or 34 cents per share, for the third quarter to 2 May, compared to earnings of $129m, or 31 cents per share, in the same period of the previous year.

The result includes a non-recurring 2-cent gain from Campbell's share of a settlement from a class action lawsuit involving ingredient suppliers.

For the third quarter, net sales rose 4% to $1.7bn, as currency effects and higher pricing offset lower volume and increased promotional spending.

"Our earnings in the quarter were in line with our projections, but we must address the decline in our operating margins. We knew this quarter would be a difficult sales comparison for US Soup because we were lapping an extremely strong third quarter last year and we are following a strong second quarter this year. In addition, we continued our heavy investment in promotional activity to be fully competitive in this category," said president and CEO Douglas Conant.

"Despite lower US Soup sales in the third quarter, the year-to-date performance of US Soup demonstrates continued progress. Our investments in higher quality products, convenient packaging and integrated marketing are driving top-line growth. We have delivered strong growth in ready-to-serve soup and broth while improving the trend in condensed soup. Our convenience platform for soup is gaining wider consumer acceptance. As we look toward the next soup season, we are putting plans in place to continue to drive top-line growth while also improving our bottom-line performance,"
Conant added.

The company expects earnings per share of approximately $1.60 for fiscal 2004, which includes the one-time gain from the class action settlement. For the fourth quarter of 2004, the company expects earnings per share to be approximately 17 cents, compared to 18 cents a year ago.