ConAgra Foods today (21 December) posted a 16% fall in quarterly profits as input costs rose and the US group’s promotions did not pay off as expected.
The company, which owns brands including Banquet ready meals and Chef Boyardee canned pasta, posted net income of US$200.9m for the 13 weeks to 28 November, down 16.2% on the year.
A fortnight ago, ConAgra issued a profit warning, cutting its full-year earnings target on the back of expected lower profits for the second quarter.
During the quarter, operating profit fell 14.7% to $410.2m. Profits from ConAgra’s consumer foods division dropped 14% to $283.9m, while profits from its B2B commercial foods unit slid 16.4% to $126.3m.
ConAgra’s second-quarter sales, however, rose 2% to $3.16bn thanks to improved volumes from its B2B Lamb Weston potato unit and higher sales from some consumer brands, including Marie Callender’s and Reddi-wip.
However, ConAgra chairman and CEO Gary Rodkin said “several challenges” had “impacted” the company’s results.
“Difficult market conditions, weaker-than-planned consumer response to promotions, and higher-than-planned inflation weighed on [the company’s] consumer foods’ profits despite progress in overall unit market shares and volume,” Rodkin said.
“Profitability of our commercial foods segment was below expectations primarily due to selling and processing last year’s high-cost, unusually low-quality potato crop. In aggregate, it was a challenging quarter.”
Nevertheless, Rodkin said ConAgra’s moves to increase prices, cost savings and an “accelerating contribution” from new products and recently-acquired businesses would improve the company’s results in the second half of the year.
Shares in ConAgra were up 1.2% at $22.70 at 10:51 ET this morning.
Click here for the full statement from ConAgra and click here for more insight into the firm’s quarterly results.
