TreeHouse Foods, the biggest private-label supplier in the US, is revising its full-year earnings per share guidance lower amid “adverse” market conditions, pressure from commodity costs increases and lower volumes.
Sales decreased 1.2% to US$1.5bn in the three months through June from a year earlier, which the Illinois-based company attributed to a drop in volumes, prices and foreign-currency losses, as well as the divestiture of SIF.
TreeHouse sold SIF in April this year to Riverbend Foods, a new entity set up by private-equity firm Insight Capital. At the time, TreeHouse said the asset sale would have “a negligible impact” on its “ongoing operating income”.
The company today (3 August) booked a $34.2m loss in the second quarter, compared to net income of $19m in the corresponding period of 2016. It said the swing was “more than explained by the divestiture of the SIF business”.
However, TreeHouse chairman and CEO Sam Reed said the company’s margins were recovering more slowly than it had expected. He said TreeHouse had seen “adverse” market conditions, as well as a lag between feeling commodity cost increases and securing prices increases. Reed said the company had also been affected by “operational inefficiencies” after volumes were lower than expected.
Separately, TreeHouse announced it is launching a restructuring programme targeting a three percentage-point increase in operating margin by the end of 2020.
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Under Generally Accepted Accounting Principles, or GAAP, the company posted a second-quarter loss per fully diluted share of $0.60, compared to earnings of $0.33 a year earlier. Adjusted earnings per fully diluted share came in at $0.51 versus $0.60.
Reed said the company was lowering its full-year guidance for adjusted earnings per fully diluted share to a range of $3.15-$3.30, adding that its “current forecast is below our expectations”.
“As we enter the back half of the year, the environment remains highly competitive, which is pressuring volumes across nearly all of our divisions. We are diligently working to improve our operational effectiveness, aggressively simplify our offerings, and reduce our cost structure.”