San Francisco-based Del Monte Foods Co, the largest producer and distributor of branded processed fruit, vegetable and tomato products in the US, has reported a drop in adjusted earnings per share for the Q3 2002 to US$0.21, from US$0.24 for the Q3 2001.

Q3 net sales were US$343.9m, compared to US$328.7m for the Q3 2001. Adjusted net income for was US$11.3m, compared to US$12.8m year on year.

"We continue to be pleased with the progress we've made towards our strategic objectives," said chairman and CEO Richard G. Wolford. "Our market shares are up in each of our three businesses and we've made significant investments against specific new products targeted at fast-growing high margin market segments of our business.

"We have also continued to make excellent progress toward our goal to reduce debt and delever our company. As a result of our inventory reduction efforts, we were able to generate better than anticipated cash flows and prepay US$65m of our term loan during the quarter. These lower debt levels combined with reduced interest rates have resulted in significantly lower interest expense this year."

The increase in net sales for the quarter was due primarily to the acquisition of S&W and the impact of a 1 July retail price increase, net of the impact of higher promotion expenses. Adjusted earnings per share reflect these higher sales, offset by increased marketing investments to support the S&W and SunFresh businesses, new products, increased fixed costs, as production volumes were reduced to decrease inventory levels in order to reduce debt and lower interest expense, and lower returns on pension assets.

On a GAAP basis, the company announced net sales of US$343.9m and net income of US$10.7m for the Q3 2002, compared to net sales of US$328.7m and net income of US$10.7m in the prior year period.

Nine months

Adjusted earnings per share were US$0.57 for the first nine months of fiscal 2002 compared to US$0.61 for the first nine months of fiscal 2001. Adjusted net sales were US$1bn compared to net sales of US$949.9m for the same period last year. Adjusted net income for the period was US$30.2m, down from US$32m year on year.

On a GAAP basis, the company reported net sales of US$1,007.5m and net income of US$24.3m for the first nine months of FY 2002, compared to net sales of US$949.9m and net income of US$25.6m in the prior year period.

Outlook

For the FY 2002, the company still expects top line growth of 2-4% and adjusted earnings per share of between US$0.83 and US$0.87. As compared to the prior year, adjusted earnings per share are expected to reflect higher sales offset by increased marketing investments in existing products and new products and increased fixed costs, as production volumes were reduced to decrease inventory levels and associated debt.