Shares in ConAgra Foods slumped in pre-market trade this morning (30 June) as it emerged the performance of the US company’s consumer foods unit weighed on its overall result.
Reporting for the 12 months to 29 May, a year that saw ConAgra sell off its private-label business and detail its intention to split its Lamb Weston industrial business from its consumer food unit, ConAgra said total sales fell 2.5% to US$11.64bn.
The decrease was led by lower revenue from its consumer foods business, which includes brands such as Hunt’s tomato sauce and Peter Pan peanut butter. Consumer food sales fell 4.5% in the year, dropping to $7.22bn. This more than offset the 1.1% increase in commercial food sales during the period.
The top line decline accelerated in the fourth quarter, ConAgra revealed, when consumer sales fell 11.9%.
Shares in the food maker were down 3.36% before the market opened in New York today, dropping to $46 per share.
The company did, however, point to “productivity savings” and lower commodity costs, which enabled it to report increased operating profit for the year. Full-year consumer operating profit rose 1.8% to $1.08bn while Lamb Weston operating earnings increased 11.8% to $633.2m. Total operating profit increased 5.3% to $1.7bn.
Despite a stronger operating performance, losses from discontinued operations and higher SG&A costs associated with restructuring efforts, dented the bottom line. Net earnings fell to a loss of $665.9m versus a loss of $240.8m a year earlier.
Looking to the coming year, ConAgra said it expects to separate into two pure-play companies, Conagra Brands and Lamb Weston. “The transaction is expected to be structured as a spin-off of the Lamb Weston business, tax free to the company and its shareholders, in the fall of calendar 2016,” the company stated.
Recent press reports suggested that ConAgra had held talks with Post Holdings over a possible sale of Lamb Weston. However, these discussions have been abandoned for the time being.