US: Diamond hit by issues at nut business

By Katy Askew | 6 December 2013

Diamond reaffirms outlook despite sales, earnings slide

Diamond reaffirms outlook despite sales, earnings slide

Diamond Foods has booked a drop in first-quarter sales and earnings, hit by lower walnut supplies and the relaunch of its Emerald nut brand.

The company said net sales fell 9.2% in the three months to the end of October to US$234.7m. Higher snack sales failed to offset a decline at the group's nut business. Snack sales increased 1.2% while nut sales fell 17.1%.

The group saw a 6.1% drop in adjusted EBITDA, which sank to $29.1m. The Kettle Chips maker reported a non-GAAP net income of $5m but Diamond said it racked up a net loss of $42.2m in the period.

The company has been struggling to emerge from the shadow of an accounting scandal that saw incorrectly accounted payments to walnut growers. 

While first-quarter sales and earnings were down, Diamond did report an improvement in gross margin, which rose to 24.7% compared to 22.7%. The firm reiterated its outlook that it anticipates full-year adjusted EBITDA to improve

Show the press release

Diamond Foods Reports First Quarter Fiscal Year 2014 Financial Results SAN FRANCISCO, Dec. 5, 2013 (GLOBE NEWSWIRE) -- Diamond Foods, Inc. (Nasdaq:DMND) ("Diamond") today reported financial results for its fiscal 2014 first quarter ended October 31, 2013.

First Quarter Fiscal 2014 Highlights

Net sales decreased 9.2% to $234.7 million Snacks sales increased 1.2% to $112.6 million and Nuts sales decreased 17.1% to $122.1 million Gross margin was 24.7% compared to 22.7% Net loss was $42.2 million and non-GAAP net income was $5.0 million Adjusted EBITDA decreased 6.1% to $29.1 million (All comparisons above are to the first quarter fiscal year 2013. Non-GAAP financial measures are reconciled in the tables below)

"Our first quarter financial results were in line with our expectations and reflect the headwinds we anticipated from lower walnut supply and Emerald re-launch costs," said Brian Driscoll, President and CEO. "We continue to focus on gross margin improvement strategies as well as investing in brand building and innovation as we seek to achieve long-term sustainable growth. Looking ahead, we expect to benefit from the improved foundation of our business, and remain confident that we are on track to achieve earnings improvement in fiscal 2014."

First Quarter Fiscal 2014

Net sales decreased 9.2% to $234.7 million compared to $258.5 million in the prior year period and gross profit as a percent of net sales was 24.7% compared to 22.7% last year.

Net loss was $42.2 million, or a loss of $1.92 per share on a fully diluted basis. During the quarter, Diamond incurred $23.5 million in expenses for the mark to market adjustments related to shares issuable in connection with the settlement of the securities class action lawsuit, a $5.0 million expense associated with the Company's estimated future impact from a potential resolution of the Securities and Exchange Commission investigation and a $17.0 million charge related to a change in the fair value of the Oaktree warrant liability. Excluding these charges, non-GAAP net income for the first quarter was $5.0 million and non-GAAP fully diluted earnings per share was $0.18. Adjusted EBITDA was $29.1 million compared to $31.0 million in the prior year period. Adjusted EBITDA is a non-GAAP financial measure. Please refer to the tables in this press release for a reconciliation of all non-GAAP financial measures.

As of October 31, 2013, net debt outstanding was $583.0 million, including the Oaktree debt at its carrying value. Cash and availability on Diamond's bank revolving line of credit on October 31, 2013 was approximately $85.3 million.

Segment Review

The Company has two reportable segments: Snacks and Nuts. The Snacks segment includes products sold under the Kettle U.S., Kettle U.K. and Pop Secret brands. The Nuts segment includes products sold under the Diamond of California and Emerald brands.

Snacks Segment: Net sales during the first quarter increased 1.2% to $112.6 million compared to prior year period. Gross profit during the first quarter was $39.4 million, 35.0% of net sales, compared to $38.3 million, 34.4% of net sales, in the prior year period.

Nuts Segment: Net sales during the first quarter decreased 17.1% to $122.1 million compared to the prior year period. Gross profit during the first quarter was $18.5 million, 15.2% of net sales, compared to $20.3 million, 13.8% of net sales, in the prior year period.

Outlook

The Company expects year-over-year improvement in fiscal 2014 Adjusted EBITDA as it continues to benefit from the execution of its multi-year turnaround strategy.

Original source: Diamond Foods

Sectors: Financials, Snacks

Companies: Diamond Foods

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