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August 2, 2019

Disposals make TreeHouse “less volatile”, CEO says

TreeHouse Foods CEO Steve Oakland has updated analysts on the US-based private label giant's restructuring programme, which is due to complete next year.

By Leonie Barrie

TreeHouse Foods CEO Steve Oakland has told analysts the US private-label supplier’s moves to sell off assets will make the company’s sales and profit figures “more predictable”.

Speaking after the company reported second-quarter and first-half financial results, Oakland said the TreeHouse 2020 restructuring programme, announced in 2017, is on schedule.

The programme is intended to make the business more competitive by improving profitability and accelerating growth.

“The last two years have largely been about TreeHouse 2020 efforts. In that time, we’ve done some really heavy lifting. We’ve simplified our portfolio through SKU rationalisation, we’ve centralised our supply chain, and the work to optimise the plant and warehouse network is in the final few innings,” Oakland said.

Since 2017, TreeHouse has announced a number of plant closures. This year, it has disposed of its snacks division to Atlas Holdings for US$90m and its ready-to-eat cereals business to Weetabix owner Post Holdings for an undisclosed sum, although the latter deal is still being considered by the US consumer watchdog the Federal Trade Commission.

Oakland suggested to analysts the transactions will have a positive impact on TreeHouse’s performance.

“The current portfolio will have less volatility than the prior portfolio. I would also argue the operating performance of the business is going to be much more predictable not just on the top-line but the bottom-line,” he said.

TreeHouse reported sales of $1.25bn for the three months to the end of June, down from the $1.45bn recorded in the equivalent quarter in 2018. An operating loss of $149.6m compared to a profit of $3.9m a year ago and net losses widened from $19.5m to $171.8m.

Oakland admitted: “Revenue of $1.25bn fell short of our expectations and we still have some work to do to improve the top-line for baked goods, beverages and meal solutions, where we still are lapping some loss volume and we’ll continue to do so until we get to the fourth quarter.”

The business lowered its full year earnings per share guidance from a range of $2.35-$2.75 to $2.33 to $2.63, partly as a result of the divestments, chief financial officer Matthew Foulston told analysts.

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