ConAgra Continues to See Growth in Fiscal Second-Quarter 2013, Readies for Ralcorp Acquisition

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading North American food company ConAgra Foods Incorporated (NYSE:CAG) (Omaha, Nebraska) reported overall improvement in the second quarter of fiscal year 2013, as solid results from the Lamb Weston potato business continued to be a significant boost, along with recent acquisitions and less problematic cost inflation. Net income was reported to be $211.6 million, a 17.43% increase from fiscal second-quarter 2012.

Net sales stood at $3.74 billion, an 8.85% increase from the same period last year. Among the brands in the Consumer Foods segment, which accounts for almost two-thirds of the company's sales so far in fiscal 2013, that showed sales growth were Wesson, Orville Redenbacher's, Reddi-wip, Hebrew National and Marie Callender's. The segment benefited from favorable price mix and cost management initiatives. The Commercial Foods segment also saw favorable price mix, as well as a strong international performance from the Lamb Weston potato operations.

Capital expenditures from continuing operations for property, plant and equipment were $82 million in the second quarter of fiscal year 2013, compared with $65 million in the same period last year.

Industrial Info is tracking $552 million in projects involving ConAgra, including the planned, $200 million construction of a french fry plant in Boardman, Oregon. Preliminary engineering has begun on the project, which involves constructing a 192,000-square-foot, state-of-the-art addition, and installing a new line to increase the capacity to make french fries and other frozen potato products. The project is expected to be completed in June 2014.

"We expected overall organic volumes to be down, given consumer purchasing trends in the still-challenging economy--and importantly, the pricing we took in recent quarters to combat inflation is also a factor," said Gary Rodkin, the chief executive officer of ConAgra, of the Consumer Foods segment in a conference call. "In addition, we have been very disciplined with our pricing architecture, and in some cases we've deliberately chosen to improve profit margins instead of growing volumes."

Both of ConAgra's operating segments reported gains in sales and operating profits for the quarter, with the Consumer Foods segment in the double digits:

• The Consumer Foods segment reported sales of $2.42 billion for the quarter, an 11.24% increase from second-quarter 2012, and operating profits of $286 million, an 11.59% increase.
• The Commercial Foods segment reported sales of $1.31 billion for the quarter, a 4.7% increase from the same period last year, and operating profits of $169.3 million, a 5.29% increase.

Shortly after the second quarter ended, ConAgra announced that it would acquire Ralcorp (NYSE:RAH) (St. Louis, Missouri), another store-brand food manufacturer, in a transaction valued at about $6.8 billion. The deal is expected to be completed by the end of March 2013, subject to the approval of Ralcorp shareholders and regulators, as well as other closing conditions. Acquisitions completed earlier in the fiscal year include Bertolli and P.F. Chang's Home Menu, two frozen meals business previously owned by Unilever plc (NYSE:UL) (Englewood Cliffs, New Jersey).

Consumer Foods volumes are expected to continue to improve throughout the remainder of the fiscal year.

"We expect volume trends to continue to improve sequentially throughout the remainder of the fiscal year as we fully lap last year's price increases and as the benefit of the recent innovation, marketing and customer connect initiatives continue to accelerate," Rodkin said in the conference call.

For more information, visit Industrial Info's North American Food & Beverage Project Database.

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