US: Higher costs hit Campbell Soup profits

By Michelle Russell | 21 May 2012

9M net profits slide 8.2%
EBIT declines 9%
Sales drop 0.3%

Campbell Soup saw an 8.2% decline in nine-month profits

Campbell Soup Co has booked a decline in third-quarter and year-to-date profits as the company struggled with rising commodities costs, higher marketing and selling expenses and sluggish soup sales.

Net earnings for the nine months to 29 April were US$647m, an 8.2% decline on the prior-year period, the company reported today (21 May).

Marketing and selling expenses increased $3m to $814m in the period as a result of higher advertising and consumer promotion expenses, the firm said. Excluding items impacting comparability, adjusted net earnings declined 7% to $653m.

EBIT amounted to $1.01bn compared with $1.11bn a year earlier. The decline was primarily due to a drop in gross margin to 38.9% from 40.3% last year.

Sales in the period also dropped, by 0.3% to $6.09bn, impacted by price and sales allowances and increased promotional spend. In the firm's US simple meals division, sales dropped 2% in the nine-month period, while US soup sales declined 3%.

In the third quarter, net profits slid 5.3%, while EBIT dropped 14% to $264m. Sales remained flat at $1.8bn.

"Although overall sales trends are improving, we are not satisfied with our performance this quarter," said president and CEO Denise Morrison. "As planned, we focused our marketing efforts on increasing advertising and consumer promotion. We executed well in some businesses, delivering solid sales growth in US beverages, Pepperidge Farm and Canada. We did not execute as well in others."

Nevertheless, Campbell said it now expects adjusted earnings near the higher end of its earlier estimated range of $2.35 to $2.42 thanks to a favourable tax rate. Net sales growth is expected near the lower end of its earlier view of 0% to 2%.

Click here to view the full earnings release.

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