ConAgra Posts Solid Results in Fiscal First-Quarter 2013, as Acquisitions, Lamb Weston Bring in the Dough

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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 solid gains in sales and profits in the first quarter of fiscal year 2013, as recent acquisitions and continued, solid contributions from the Lamb Weston potato operations business kept the company in good shape amid difficult market conditions. Net income for the quarter was reported to be $252.2 million, compared with $94.1 million in the first quarter of fiscal year 2012.

Net sales for the quarter stood at $3.31 billion, a 6.65% increase from the same period last year. Acquisitions proved to be a major boon to the Consumer Foods segment, more than offsetting a sharp, double-digit increase in marketing expenses. The Commercial Foods segment benefited from a strong international performance by the Lamb Weston potato business, which saw solid volume growth both internationally and domestically, as well as healthier pricing. All product lines in the Commercial Foods segment posted volume growth. Capital expenditures for property, plant and equipment totaled $99 million, up slightly from $96 million in the same period last year.

Recent acquisitions by ConAgra include Bertolli and P.F. Chang's Home Menu, two frozen meals business previously owned by Unilever plc (NYSE:UL) (Englewood Cliffs, New Jersey), which were completed during the first quarter. The company acquired them for about $267 million, but the annual sales for these two companies total about $300 million. ConAgra's bottom line also benefited from $130 in net hedging gains during the quarter, as opposed to $34 million in losses in the first fiscal quarter of 2012.

Among the well-known ConAgra brands that posted sales growth for the quarter were Slim Jim, Wesson, Orville Redenbacher's, Peter Pan, Reddi-wip and Marie Callender's.

Industrial Info is tracking $211 million in ConAgra projects, including the planned $60 million, Phase II construction of a sweet potato processing plant in Delhi, Louisiana, and the ongoing, $15 million construction of a flour mill in Oakland, California. The Delhi project, which currently is undergoing economic evaluation, would involve the construction of a building addition and the installation of additional processing and packaging equipment to increase the production capacity of sweet potatoes. The Oakland project involves replacing and modifying existing equipment to increase production to 500 tons per day, for a total mill output of 700 tons per day.

"Over the past year or so, we've completed six transactions, strategically adding to our portfolio, and these are helping drive stronger top-line and bottom-line performance," said Gary Rodkin, the chief executive officer of ConAgra, in a conference call. "Organically, 5% favorable price mix offset a 4% organic volume decline--and foreign exchange weight on sales--by a [percentage] point. The favorable price mix was a result of prior pricing actions taken to combat inflation."

Both of ConAgra's operating segments reported solid gains in sales and operating profits for the quarter:

• The Consumer Foods segment reported sales of $2.04 billion for the quarter, a 7.98% increase from first-quarter 2012, and operating profits of $235.3 million, a 19.92% increase.
• The Commercial Foods segment reported sales of $1.27 billion for the quarter, a 4.59% increase from the same period last year, and operating profits of $139.6 million, a 43.18% increase.

ConAgra executives expect to see more modest rates of growth as the 2013 fiscal year progresses, as marketing expenditures will continue to increase and comparisons with the previous year are expected to become more difficult. However, volume performance is expected to continue to see improvement, based on the positive impact of price increases in fiscal 2012.

"We're very excited about the strong growth opportunities internationally, and we're aligned with global customers who have dynamic growth plans in emerging markets and will look to us to be a key supplier, playing an important role in their global growth initiatives," Rodkin said in the conference call.

Capital expenditures for the full fiscal year 2013 are now expected to surpass the previous estimate of $450 million, because of additional growth investments.

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

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.