Shares in US private-label manufacturer Treehouse Foods closed up in New York yesterday despite the company posting a fall in second-year profits.
Treehouse said its net income had tumbled by more than a third to US$14.3m in the three months to the end of June. Operating income was down 17.8% at $33.6m. Adjusted earnings per share stood at $0.43, in line with analysts’ consensus.
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The falls had been expected after Treehouse issued a profit warning in June and said second-quarter margins would be lower as the company had yet to fully offset the increase in its input costs with price rises.
However, Treehouse’s net sales increased by 10.4% during the quarter to $492.6m. Chairman and CEO Sam Reed described Treehouse’s sales were “very strong” but said they had been “overshadowed” by the impact rising costs had on the company’s margins.
Nevertheless, he added: “We have aggressively pursued price increases to offset these costs and have succeeded in achieving the pricing necessary to recover our margin shortfalls over the back half of the year.”
BB&T Capital Markets analysts Heather Jones and Bretty Hundley said there had been “a number of favourable developments” in the second quarter that should help Treehouse’s earnings.
The analysts pointed to the 5% rise in Treehouse’s volumes with North American retailers and said the company’s management had used recent acquisitions to boost distribution.
They added: “Its second round of pricing is now in place, and we expect margins to return to more normalised levels, which could translate into earnings upside, given our view of sustainable retail sales growth.”
Shares in Treehouse closed up 2.23% on the New York Stock Exchange yesterday at $53.66.
For the full Treehouse statement, click here.
