US speciality food group Lancaster Colony says it has “considerable flexibility” in its balance sheet to support potential food-related acquisition.
Lancaster yesterday (22 August) booked an increase in annual earnings and offered an “optimistic” outlook for 2014, driven by anticipated growth in its speciality foods division.
The branded and private label foods producer said it is expecting further growth in fiscal 2014 through added volumes from several newer retail and foodservice programmes, as well as through further market expansion of certain key product lines.
CEO John Gerlach said: “We also foresee the potential for modestly favourable material cost comparisons as we move later into the fiscal year. We believe our strong and flexible balance sheet supports our future growth potential, including appropriate food-related business investments and acquisitions.”
Speaking on the firm’s earnings call yesterday, CFO John Boylan said the company’s balance sheet was “generally reflective of fairly modest year-over-year fluctuations”.
Boylan said Lancaster’s inventories declined “slightly” in the period and its shareholders equity declined in during the year affected by a US$5 per share special dividend paid last December.
However, he said the company continues to have no debt and ended the fiscal year with over $120m in cash and equivalents. “We therefore believe that we retained considerable flexibility in our capital structure to support foreseeable future growth initiatives.”
Great Lakes Review analyst Greg Halter suggested the firm might be actively looking for or considering a potential a deal in light of the recent acquisition of salad dressings business Wish-Bone by Pinnacle Foods.
“The deal flow has been relatively light, but we do continue to look for what we would view is good fitting opportunity,” Gerlach told analysts. “We like the departments, categories that we are in today at the retail level and we are particularly looking for branded retail opportunities again and like to produce department we’d still be interested in frozen but open to around the store as well.”
Comment on the Wish-Bone deal, the CEO said Lancaster has only a “little bit of a presence” in shelf stable salad dressings, “but not a lot”. Therefore, said: “[We] wouldn’t have considered that a high priority kind of opportunity for us.”
Separately, Gerlach said the company said its capital expenditure this year will total US$25m, “somewhat more” than in the prior year.
A “significant” project will involve increasing the capacity and throughput of its dressing facility in Kentucky.
“This is largely a capacity driven expansion although it should help efficiencies a bit, but it is all machinery equipment within the existing walls of the plants, so mainly processing equipment, more mixing capability and blending et cetera,” Gerlach said.