ConAgra Foods is to boost its marketing spend behind key brands as part of a long term plan but warned that the impact of implementing the changes would depress immediate earnings.
In a statement, the company said it expects increased annual marketing spending of more than US$75m, in combination with the reallocation and disciplined application of current marketing dollars, to result in major increases for key consumer brands.
The company also said it expects strong contribution to its future earnings from the impact of plant rationalisation, supply chain improvements, the application of divestiture proceeds and reductions in administrative costs, including significant costs currently absorbed by businesses to be divested.
“It is essential that we increase our investments behind our highest potential brands, simplify our portfolio of businesses and build a high quality earnings trajectory for ConAgra Foods,” said Gary Rodkin, president and CEO. “The planned divestitures are the catalyst for our ability to attack costs, streamline our operations and return quickly to recent earnings levels, but with a significantly stronger foundation for future performance.”
The statement said that although the company expects a return to current earnings levels during the 2009 financial year, the cost of implementing the actions and the impact of planned divestitures are expected to depress operating earnings until that time.
The company expects fiscal year 2007 earnings in the range of $1.10-$1.15 per share, excluding items that impact comparability, and also confirmed that its internal plans are for year-over-year earnings per share growth in the second half of fiscal 2006, excluding items that impact comparability.
The board of directors of the company declared a quarterly dividend of 18 cents per share payable on 1 June 2006 to shareholders of record as of 1 May 2006.
“The dividend continues to represent one of the highest payout levels among consumer food companies, but is 9.25 cents per share lower than the company’s most recent quarterly dividend,” the statement said.
The company also announced plans to divest its seafood and domestic and imported cheese businesses. This follows the company’s February announcement that it would divest most of its refrigerated meats operations. It has already announced definitive agreements for the divestiture of its Louis Kemp seafood and Cook’s Ham businesses. Aggregate annual revenue of the meat, seafood and cheese businesses to be divested is approximately $2.8bn.