WhiteWave Foods CEO Gregg Engles has reaffirmed the Alpro owner’s interest in expanding its business through acquisitions.
The US company last week raised the lower end of its full-year profit guidance, despite recording a drop in first-half earnings. The company said it experienced higher supply chain costs and increased its marketing investments in the period.
However, speaking on the firm’s earnings call on Friday (9 August), CEO Gregg Engles said the company was in “a great position” with a “fantastic” balance sheet.
“We’re less than two-and-a-half times leveraged and with growing EBITDA and cash flow, we’re deleveraging that aspect of our balance sheet very quickly. So we feel like we’re just really well positioned to continue to grow the business,” he told analysts.
“If [we] can find the right thing that sort of fits the company and category and brand profile that we have as a business and that you can acquire from a multiple that makes sense, you’ll see as good M&A.”
Engles, however, said it wasn’t a “mutually exclusive choice” between M&A and building its current roster of brands organically.
“We think it’s an opportunity, we think it’s an ‘and’ as opposed to an ‘or’. But, if we’re going to make significant investments in additional categories and brands, there need to be businesses and brands that fit with the overall profile of our company.”
If WhiteWave were to make acquisitions, Engles said the brands would have to look like its existing businesses, as well as be able to be “effectively managed within our structure and that are supported by favourable consumer dynamics and trends over time”.
Engles said the company would also continue to innovate in order to grow the business. In the “ongoing challenging economic climate” of Europe, the CEO said WhiteWave was looking to build on its soy yoghurt offering and its plant based beverage platform.
He added: “We’re excited about the many opportunities we have to build upon our strong silk brand, as consumers continue to migrate to the great taste and health and wellness attributes of plant based foods and beverages. Those opportunities include expanding our offerings into new and differentiated areas that continue to increase consumer awareness, usage occasions and household penetration.
“We feel great about the innovation we’re bringing to the category to drive expansion as well as our advertising and marketing.”
BMO Capital Markets analyst Amit Sharma pointed to potential concern over the increased competition in the almond category in North America, particularly from private label.
Engles, however, seemed relatively unfazed by the suggestion. “We’ve got competitors, good competitors in all of our categories. So the almond sub-segment is now 55% of the category [and] is growing 50% in the most recent period. So, you’re going to attract interest from branded and private label competitors in the category like that, it’s not anything different than what we’ve seen in any of the businesses that we participate in.
“We’re growing at or above the rate of growth in the sub category. So we’re stable to taking share in the category. And we think we have great innovations and a great brand position.”
For the full year, the company said it now anticipates adjusted EPS of between $0.69 and $0.72 from its previous forecast of between $0.68 and $0.72. The firm reiterated an adjusted total operating income growth rate in the mid-teens.
Looking to the third quarter, WhiteWave said the biggest headwind will be a year-over-year increase in distribution related cost.
Engles, however, added: “Our supply chain costs remain higher than desired, but we are making steady progress on the capacity expansion plans we previously communicated to lower these costs over time.
“We’re very excited about the opportunities that we feel lie ahead for us to continue to create value for our shareholders.”