ConAgra Sees Sales Boost in Third-Quarter 2011, but Costs Weigh on Gains

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading North American food company ConAgra Foods Incorporated (NYSE:CAG) (Omaha, Nebraska) saw improved sales in fiscal third-quarter 2011 as strong performances by consumer brands and higher pricing in the Commercial Foods segment alleviated some, but not all, of the effects of inflationary pressures on costs. Net income for the quarter was reported to be $214.8 million, a 6.45% decrease from third-quarter 2010.

Net sales stood at $3.15 billion, a 4.1% increase from the same period last year. The Consumer Foods segment, which accounted for two-thirds of third-quarter sales, was boosted by sales growth among brand names such as Banquet, Healthy Choice, Manwich, Peter Pan, Slim Jim and Wesson. The Commercial Foods segment, which accounted for the remaining third, benefited from higher selling prices in the flour milling operation and volume growth in the Lamb Weston potato products. However, these gains were offset by $49 million in segmental restructuring and asset impairment costs, as well as high input cost inflation.

"We're seeing progress in the back half of our fiscal year," said Gary Rodkin, the chief executive officer of ConAgra Foods, in a conference call.

Both ConAgra segments saw solid sales increases when compared to third-quarter 2010, but operating profits still suffered:

• The Consumer Foods segment reported $2.08 billion in sales, a 2.48% increase from the same period last year, but saw $263.3 million in operating profits, a 14.04% decrease.
• The Commercial Foods segment reported $1.07 billion in sales, a 7.4% increase from third-quarter 2010, but saw $139.4 million in operating profits, a 2.18% decrease.

ConAgra is expecting low, steady growth for the remainder of 2011, and is continuing to implement cost-saving measures to combat inflationary pressures; the company is expecting to see more than $275 million in savings in the Consumer Foods segment alone by the end of the fiscal year. ConAgra is also continuing to implement net pricing increases.

"Inflation pressures continue, and we're battling them with pricing actions under way, continuing supply-chain cost savings, reducing advertising and promotion expenses, and lowering incentive compensation expenses," Rodkin said in the conference call. "It goes without saying that pricing is on the top of everyone's mind. The recent and continued inflationary environment has made it necessary to take prices up responsively."

Industrial Info is tracking 12 active ConAgra projects in the U.S. that are worth at total of more than $245 million, including the $40 million expansion of a grain elevator in Kalama, Washington, that has a storage capacity of 1.5 million bushels. The project involves the erection of eight additional 100,000-bushel concrete storage bins and a new wheat-cleaning system, which will increase storage capacity by 21,000 tons. For more information, visit Industrial Info's North American Food & Beverage Project Database.

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