Price increases and volume growth have helped Del Monte Foods report a strong third quarter, leading the company to raise its sales estimates for the full year.
Income from continuing operations for the quarter were US$52.0m and diluted earnings per share reached $0.26, compared to income from continuing operations of $48.6m and $0.23 per diluted share for the prior year period, including $0.01 of integration expense.
Third quarter net sales were $878.5m, an increase of 2.0% from prior year period.
The increase in net sales was driven primarily by increased pricing and volume growth from new products. These gains were partially offset by lower volume, in large part reflecting volume loss associated with price increases (elasticity) which was in the expected range.
Del Monte said its year-over-year third quarter earnings increase was driven by this solid top-line performance, as well as by several combined factors, including lower interest expense, the absence of integration expense, lower overhead expenses and the benefits from the share repurchase program, partially offset by increased steel, energy, logistics and other transportation-related costs.
“We are pleased with our third quarter results, which reflect continued execution of our brand-focused strategic plan. Positive pricing and new product introductions, both enabled by our strong brands, drove solid, top-line growth,” said Richard G. Wolford, chairman and CEO of Del Monte Foods. “While, steel, energy and transportation cost increases continue to pressure margins, going forward we believe that focused execution on our strategic plan will help us combat these inflationary costs and deliver increased value to shareholders.”
“Importantly, the acquisition of Meow Mix and the sale of our private label soup and infant feeding businesses, which we also announced today, are two key milestones in our execution of Project Brand,” continued Wolford. “These two transactions represent major steps in Del Monte’s strategic commitment to expand its portfolio of higher margin businesses in fast growing categories with leading brands that can support ongoing innovation. Together, these transactions will enhance the margin and growth potential of the entire company and catapult us toward our goal of creating a more value-added, branded consumer packaged food company.”
For fiscal 2006, the company now expects to deliver sales growth above its previously announced one to three per cent sales growth guidance range. Additionally, the company continues to anticipate delivering full-year fiscal 2006 earnings per share at the low end of its original $0.75 to $0.80 guidance, which includes estimated earnings per share of $0.09 from the private label soup and infant feeding businesses which will be reported as discontinued operations.
The company also anticipates a small, one-time gain from the sale of infant feeding and private label soup businesses. On a continuing operations basis, the company expects to deliver earnings per share of $0.66 to $0.71.
For the fiscal 2006 fourth quarter, the company expects to deliver sales growth of approximately 1 to 3% over net sales of $847m in the fourth quarter of fiscal 2005. Including both continued and discontinued operations, diluted earnings per share is expected to be approximately $0.18 to $0.23.
