Camden, NJ-based food giant Campbell Soup Co yesterday [Wednesday] reported diluted earnings per share for the Q3 ended 28 April 2002, of US$0.23, matching analysts’ forecasts.
Excluding the costs of the company’s previously announced Australian manufacturing reconfiguration, diluted earnings per share were US$0.24, down 20% or US$0.06 from the comparable period last year.
Douglas R. Conant, president and CEO, said: “Our multi-year plan to put Campbell back on a sustainable growth track is gaining traction. We are also continuing the required investments in infrastructure and people.”
Net sales for the world’s largest soup-maker increased 8% in the Q3 to US$1.37bn. The following factors impacted sales growth: base volume and mix were flat, price added 1 percentage point and the European dry soup and sauces acquisition, completed in the Q4 2001, added 7 percentage points.
Wet soup shipments were up 2% in the US and down 3% in international, in the Q3, resulting in flat worldwide shipments year on year. Net earnings were US$96m, or US$100m excluding the impact of the Australian reconfiguration, down 19% year on year as a result of planned increases in infrastructure and marketing investments across major businesses. Total marketing investment for the Q3 was up 5% before the impact of currency and the European acquisition, and up 12% including that acquisition.
For the first nine months of 2002, net sales increased 7% to US$4.91bn, driven by factors including: base volume and mix increased 2%, price added 1 percentage point; promotions subtracted 1 percentage point; currency exchange rates negatively impacted sales by 1 percentage point; and the European acquisition added 6 percentage points.
Wet soup shipments were flat in the US year on year in this period, and up 2% in international, resulting in a 1% worldwide increase. Net earnings were US$470m, or US$480m excluding the impact of the Australian reconfiguration, down 20% versus a year earlier.
Conant added: “In US soup, our highest strategic priority business, ready-to-serve brands such as ‘Campbell’s Chunky’ and ‘Campbell’s Select’ again delivered strong performances in the quarter. Although the rate of decline in ‘Campbell’s’ condensed soups moderated, we still have much more to accomplish with this business. Quality improvements across the entire condensed line will continue during the next three soup seasons.”
He continued, “Beyond US soup, the investments we have made in key businesses such as Pepperidge Farm in the US and Arnotts in Australia are reflected in their strong results this quarter. In addition, we continue to generate strong cash flow, which has helped accelerate the reduction in debt resulting from the European acquisition.”
For the current fiscal year, the company is maintaining its previous earnings estimate of about US$1.30 per share, excluding the impact of the Australian reconfiguration.
Q3 results by segment:
North America Soup and Away From Home
Sales for the quarter increased 1% to US$516m due to a 2% increase in US soup shipments. Operating earnings were US$108m, down 18% due to the planned investments. Shipments of condensed soup and “Swanson” broth both decreased 3%, while shipments of ready-to-serve soup increased 9%.
For the first nine months, shipments of condensed soup fell 6%, ready-to-serve soup increased 9% and “Swanson” broth increased 3%. In the Q3, shipments of eating soups fell 3% and cooking soups fell 3%. For the first nine months, shipments of eating soups were flat and cooking soups fell 1%.
North America Sauces and Beverages
Q3 sales fell 1% to US$276m. Operating earnings fell 22% to US$56m, primarily due to lower volumes and infrastructure investments.
Shipments of “Prego” Italian sauces were up slightly, due to the new pasta bake sauce. Performance of base “Prego” sauces was soft in a competitive market. Shipments of “Pace” Mexican sauces continued to increase in response to advertising and consumer promotion. Shipments of “Franco-American” canned pastas decreased significantly as a result of continued heavy competitive trade promotion programs. Shipments of “V8” vegetable juice increased strongly, reflecting positive consumer response to continued television and print advertising. Shipments of “V8 Splash” juice beverages declined.
Biscuits and Confectionery
Q3 biscuits and confectionery sales increased 5% to US$357m. Sales were up in all three businesses – Pepperidge Farm, Godiva and Arnotts. Operating earnings increased 5% to US$46m, excluding the impact of the Australian manufacturing reconfiguration.
Pepperidge Farm delivered solid sales performance across its portfolio with increased shipments and share growth in cookies, crackers and fresh and frozen breads. Godiva Chocolatier’s sales increased slightly, driven by continued global new store openings. Arnotts in Australia reported increased sales driven by the new premium “Emporio” biscuits and new rice-based snack products.
International Soup and Sauces
International soup and sauces sales in the Q3 increased 59% to US$222m compared to US$140m a year ago. Operating earnings increased 36% to US$19m, from US$14m a year ago. These results were driven by the European acquisition. Excluding which, sales fell 3% and operating earnings declined significantly. These results were driven by increases in marketing and infrastructure investments to support long-term growth and by sales softness in the UK business. The newly acquired European dry soup and sauces business continues to meet earnings expectations.