Lower costs helped boost Del Monte Foods’ first-quarter profits but the US group’s consumer food sales tumbled.
In the three months ended 28 July, earnings reached US$19.9m from $6.3m a year earlier. Operating profit soared 87.3% to $85.8m, driven by lower SG&A costs and decreased costs associated with the closure of its California facility.
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The company reported improved an EBITDA margin in the period of 16.9% compared to 13.8% in the period year period.
Sales were up 0.3% to $823.9m primarily due to pricing actions in the period, particularly in pet food, in addition to sales associated with the acquisition of Natural Balance Pet Foods.
However, sales of the firm’s consumer foods fell 5.5% to $342.9m due to a decline in unit volume sales driven by “industry-wide fruit supply constraints”. The unit also faced “continued business challenges” in South America, it said, including high inflation and currency devaluation in Venezuela.
Operating income from the division declined 26.1% to $10.2m, due to lower sales volumes and higher costs.
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By GlobalData“The company delivered a solid increase in profitability during the quarter,” said CEO Dave West. “We remain focused on generating long-term growth by investing behind our brands, as well as driving strong innovation and new go-to-market capabilities.”
In June, The Wall Street Journal reported Del Monte was looking at whether to sell its canned food business and was gauging interest from possible buyers.
Click here for our Deal or no deal analysis of the possible disposal.
Click here to view the full earnings release.
