• Consumer profits down on lower sales
  • Del Monte invested in marketing
  • Books group net profit in H1 
Profits from Del Monte consumer foods were down

Profits from Del Monte consumer foods were down

Lower second-quarter sales and investment in marketing has hit half-year profits from Del Monte Foods' consumer food business.

Del Monte, which sells consumer and pet food, today (7 December) reported a 15% slide in first-half operating profit from its consumer business of US$56m.

Consumer food sales fell 0.1% to $875.5m after second-quarter revenue from the business decreased 2.3%. Del Monte said a shift in promotions and category "softness" hit consumer food volumes in the second quarter.

Overall, Del Monte reported net profit of US$35.9m for the first half of its financial year, compared to a $10.4m loss a year earlier, when costs from its sale to a consortium of private-equity firms hit its bottom line.

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Del Monte Corporation Reports Fiscal 2013 Second Quarter Results

SAN FRANCISCO--(BUSINESS WIRE)--Del Monte Corporation:

“The Company remains committed to long-term brand building in both Pet and Consumer”

Announcement Highlights

For the second quarter fiscal 2013:

  • Net sales increased 1.5%
    • Pet Products sales increased 5.8% due to new product volumes and list pricing actions net of trade spend
    • Consumer Products sales decreased 2.3% due to existing product unit volume declines
  • Operating income declined 1.8%
  • Adjusted EBITDA1 increased 1.1%
  • Total net debt was $3,737.0 million as of October 28, 2012

1 Reflects “EBITDA” and “Consolidated EBITDA” as calculated pursuant to the Company’s 7.625% Notes Indenture and credit agreements, respectively. Please refer to the reconciliation of non-GAAP financial measures located at the end of this press release.

Del Monte Foods Three Months Ended October 28, 2012

Del Monte Foods today reported net sales in the second quarter fiscal 2013 of $1,009.7 million compared to $994.3 million in the second quarter fiscal 2012, an increase of 1.5%. Pet new product volumes and list pricing actions net of trade spend drove the increase. Existing product declines in both Pet and Consumer partially offset the increase.

Operating income declined 1.8% from $107.1 million in the prior year period to $105.2 million. The decrease was primarily driven by increased marketing and operating costs. This was partially offset by list pricing actions net of trade spend and lower G&A.

Adjusted EBITDA increased 1.1% to $160.7 million compared to $158.9 million in the prior year period. The drivers of Adjusted EBITDA were similar to those of operating income noted above. In addition, the cash impact of hedging activity drove the increase in Adjusted EBITDA. Gains and losses on economic hedging positions are recorded as other (income) expense. For cash flow hedges, the effective portion of gains and losses is deferred in equity and recognized as part of cost of products sold in the appropriate period. The cash impact of all hedging activities is reflected in Corporate Adjusted EBITDA. In calculating Adjusted EBITDA, the adjustment for cash benefits from economic hedge positions is calculated pursuant to the Company’s 7.625% Notes Indenture and credit agreements.

“The Company remains committed to long-term brand building in both Pet and Consumer,” said Dave West, CEO of Del Monte Foods. “In November, the Company launched a national integrated marketing campaign to support the iconic Del Monte brand, highlighting the brand’s vitality and nutritional appeal. Also, we continue to support new Pet Products such asMeow Mix Tender CentersPup-Peroni Mix-Stix, and Milo’s Kitchen Chicken Grillers Chicken Recipe through increased marketing investment.”

Reportable Segments – Results for Three Months Ended October 28, 2012

Pet Products

Pet Products net sales were $497.0 million, an increase of 5.8% from net sales of $469.6 million in the prior year period. The increase in Pet Products net sales was driven by new product volume growth, primarily in dry cat food and pet snacks. List pricing actions net of trade spend also positively contributed to net sales.

Pet Products operating income increased 3.4% from $79.5 million in the second quarter fiscal 2012 to $82.2 million in the second quarter fiscal 2013. The increase was primarily due to list pricing actions net of trade spend partially offset by higher marketing and operating costs.

Pet Products Adjusted EBITDA declined from $100.5 million in the second quarter fiscal 2012 to $99.9 million in the second quarter fiscal 2013, or 0.6%.

Consumer Products

Consumer Products net sales were $512.7 million, a decline of 2.3% from net sales of $524.7 million in the prior year period. The decline in Consumer Products net sales was driven by unit volume declines in existing products (retail Tomato) due to a planned shift in promotional activities and category softness.

Consumer Products operating income declined 18.0% from $51.6 million in the second quarter fiscal 2012 to $42.3 million in the second quarter fiscal 2013. The decline was primarily driven by the negative impact of the topline and higher marketing costs to support the Del Monte brand revitalization.

Consumer Products Adjusted EBITDA declined from $70.7 million in the second quarter fiscal 2012 to $56.1 million in the second quarter fiscal 2013, or 20.7%. The drivers of the decline were similar to those of operating income noted above.

Del Monte Foods Six Months Ended October 28, 2012

Net sales for the six months ended October 28, 2012 were $1,830.8 million compared to $1,770.5 million for the prior year period, an increase of 3.4%. The increase was driven by new products volume growth in Pet and list pricing actions net of trade spend.

Operating income declined from $156.4 million in the prior year period to $151.0 million, or 3.5%. The decline was primarily driven by increased marketing and operating costs. List pricing actions net of trade spend and lower G&A contributed positively to operating income.

Other income of $30.7 million for the six months ended October 28, 2012 was comprised primarily of gains on commodity hedging contracts, partially offset by losses on interest rate swaps. The gains on commodity hedging contracts recorded in the period, the cash portion of which are reflected in Corporate Adjusted EBITDA, partially offset both ingredient cost increases seen in cost of products sold and ingredient cost increases that we expect to see in future quarters.

Adjusted EBITDA increased 5.5% to $274.3 million compared to $260.1 million in the prior year period. Cash benefits from economic hedge positions are reflected in Corporate Adjusted EBITDA as noted above. List pricing actions net of trade spend partially offset by increased marketing and operating costs, contributed to the increase. In calculating Adjusted EBITDA, the adjustment for cash benefits from economic hedge positions is calculated pursuant to the Company’s 7.625% Notes Indenture and credit agreements.

Select Liquidity Data

At October 28, 2012, total debt was $3,893.3 million and cash and cash equivalents were $156.3 million. As of October 28, 2012, there were no outstanding borrowings under the Company’s $750.0 million ABL Facility. For the six months ended October 28, 2012, capital expenditures totaled $42.2 million. The Company also spent $12.0 million for the acquisition of the SnoKist assets.

Free Cash Flow2 for the six months ended October 28, 2012 was $(133.7) million, compared to $(90.5) million in the prior year period. The decline was primarily due to higher working capital (inventories) and capital expenditures. Higher Adjusted EBITDA partially offset the decline.

2 Free Cash Flow is defined as Adjusted EBITDA less cash interest, cash taxes (net of refunds), normal capital expenditures and plus/less decrease/increase in working capital (excluding the impact of the Merger). Accordingly, this excludes, among other things, $44.0 million related to tax refunds for the six months ended October 30, 2011. Please refer to the reconciliation of non-GAAP financial measures located at the end of this press release.

Original source: Del Monte Foods