B&G Foods, the US manufacturer behind brands including Green Giant and Cream of Wheat cereal, is planning for further price increases and more work on cost savings to support at-best low-single-digit sales growth in fuelling possible underlying earnings expansion in 2019.

The company saw its shares slide more than 10% in after-hours trading on Tuesday (26 February) in the wake of reporting its fourth-quarter financial results and giving earnings forecasts for 2019 that were below analyst estimates.

In the three months to 31 December, B&G Foods’ net sales decreased 1.8% to US$458.1m. The company pointed to the sale of its Pirate Brands business to Hershey, which was announced in September and finalised in October. Net sales from B&G’s “base business” rose 1.6% to $452.6m

However, B&G’s fourth-quarter adjusted EBITDA fell 15.2% to $58.5m and its net income decreased 13.8% to $111.9m.

In 2018 as a whole, B&G’s net sales increased 3.3% to $1.7bn. Base business net sales inched up 0.9% to $1.56bn. Adjusted EBITDA dropped 5.7% to $314.2m. Net income slid 20.7% to $172.4m.

For 2019, B&G is forecasting its net sales will fall between $1.635bn and $1.665bn. The company estimates its EBITDA will be between $305m and $320m, compared to consensus analyst forecasts of $324m. B&G predicts its adjusted diluted earnings per share range will fall between $1.85 and $2.00. The consensus analyst estimate is $2.03, according to Reuters.

Outgoing president and CEO Bob Cantwell, who B&G said in January would step down in April, said 2018 was a year of record net sales and said the company’s reported EBITDA, which benefited from a gain on the sale of Pirate Brands, “was also a company record”.

However, he added: “Our margins and our adjusted EBTIDA fell short of our expectations, as we continue to face elevated input and freight costs that in 2018 we were unable to fully offset with price increases and cost savings initiatives.”

Speaking to analysts after the results were published, B&G chief commercial officer Ken Romanzi, who is to succeed Cantwell next month, admitted the company was “very disappointed in our 2018 results”.

He said: “We had a great year on many fronts, highlighted by the reawakening of Green Giant and the entire frozen vegetable category with industry-leading innovation; driving solid core brand sales and consumption growth; initiating a multi-year cost savings programme; realising significant value creation with the sale of Pirate’s Booty; and generating a lot of cash. But expectations are expectations. Our earnings results this past year were far from our expectations due to lower-than-expected margins.”

Romanzi said B&G’s management was “intensely focused on delivering our 2019 plan”, which he said was “rooted into a goal of solid core brand growth of 2%, more aggressive list pricing than last year and the ramp-up of our cost productivity programme”.

He added: “Our biggest challenge in 2018 was on the cost side of the equation and we expect 2019 to be no different. To combat these inflationary pressures and position ourselves to grow adjusted EBITDA, two core pillars of our 2019 plan are pricing and the realisation of cost savings initiatives from the cost savings programme we commenced in 2018.”

B&G plans to follow price increases it managed to push through last year with more hikes about which it has already been in talks with its customers. The company expects to see those start to take hold towards the end of the second quarter.

In 2018, B&G secured price increases of $10m but had not managed to reduce its spending on trade promotions by the amount it wanted, Romanzi told analysts. “We’ve implemented another price increase effective this April, much more weighted toward list pricing and trade reductions – on more brands than last year – and we’ve included Canada as well, which we did not in 2018. And, while we’re continuing to revise our promotional activity to become more efficient, we’re not counting on much savings in our financial projections until we can prove it to ourselves we will improve our profitability.”

On securing more cost savings after starting a programme to do so last year, Romanzi said the activity was taking place “to just maintain our margins” but he added: “In the longer term, we hope to improve our margins and … we have a multi-year effort and we’ll be sharing with more ideas of what we’re going to be implementing down the road in terms of asset rationalisation and some of the more heavy-lifting cost savings ideas. They just take longer to get at.”

He added: “Now our intention is not to shrink our business over the long term. Rather, we believe our new leaner structure will make us more effective as well as more efficient. In fact, we’re investing in our sales organisation with some key hires to support our direct selling efforts in the club channel and with several key grocery customers relying less on third-party brokers.”