US food giant ConAgra Foods has spoken of “robust” acquisition plans in the wake of its unsuccessful US$5.18bn bid for private-label company Ralcorp Holdings.
ConAgra CEO Gary Rodkin said yesterday (20 September) that the company was “very committed” to the pursuit of growth via M&A, which he said was a “core strategic element” of creating long-term value for the company. Rodkin said ConAgra had already identified potential takeover targets – although he refused to be drawn on specifics.
“While [the bid for Ralcorp] did not turn out the way we had hoped, I want to be very clear that we will pursue other avenues for growth. That’s our strategy. We have a pipeline of alternatives that we’ve been assessing,” he said.
“We are ready and willing to leverage our capabilities and balance sheet for the right growth opportunities. We remain committed to growth organically and through smart acquisitions, and we’re working diligently on both.”
On Monday, ConAgra withdrew its bid for Ralcorp after its takeover target refused to enter into negotiations. In all, Ralcorp turned down three offers from ConAgra since March.
Robert Cummins, an analyst at Shields & Company, asked Rodkin if hostile takeover bids were an option should another target refuse to hold talks. Rodkin once again refused to speculate but did admit that the company would “never take any option off the table” as long as it “made sense”.
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By GlobalDataThe ConAgra chief was speaking to analysts after the company reported a fall in first-quarter profits as costs outweighed higher sales.
Rodkin spoke about the difficulties facing food producers and grocery retailers in the US amid by a slowdown in consumer spending, which he said was at an “all-time low” – an assessment backed by other executives.
ConAgra achieved sales growth this quarter, despite flat volumes after moves to increase prices. However, Rodkin acknowledged that there was little scope for passing on higher costs to consumers.
He added: “We understand the current difficult conditions facing everyday consumers, our consumers, and those conditions impose practical limits on what we can and should do through pricing. We get that. The main point is that even after responsible pricing our products are still a really strong value for consumers.”
John Gehring, ConAgra’s CFO, noted other challenges facing the company, such as problems moving to a new wheat crop and very high inflation but said he remains confident that pricing, innovation and cost-savings will improved its results.
He said: “While our pricing is still lagging some very high inflation rates, we are seeing acceleration of our price realisation over the past few quarters, which is encouraging. Inflation, unfortunately, has continued to accelerate even faster than our expectations.”
Gehring added: “Our consumer food supply chain cost reduction programmes continue to yield good results and delivered cost savings of approximately $70m in the quarter. We expect these programs to deliver approximately $275m of cost savings for the full fiscal year, consistent with our previous estimate.”
For more from the ConAgra Foods conference call, please visit Seeking Alpha.