Increased Pricing Greatly Improves Del Monte's 2Q09 Sales Figures

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Researched by Industrial Info Resources (Sugar Land, Texas)--Del Monte Foods Company (NYSE:DLM) (San Francisco, California), one of the nation's leading manufacturers of consumer foods and pet food products, reported second-quarter 2009 profits on December 3. While the company suffered a fairly bleak first quarter (see news article from August 29, 2008 - Del Monte Points to Rising Operating Costs for 1Q09 Losses), Del Monte's second quarter was much healthier. The company's total net sales were up almost $100 million from the same period last year, moving from $808 million in 2Q08 to $901 million in 2Q09, an increase of 11.5%. Within this, net sales of consumer products increased 6.1% from last year, while net sales of pet products were up 18.7%. The higher sales figures were primarily caused by increased product pricing and new product introductions.

The company has seen a large increase in costs for both the consumer and pet food industries. Costs are expected to increase about 12%, or $300 million, from the 2008 fiscal year, based on the following projections:

• Packaging costs - projected to increase $40 million to $50 million
• Logistics costs - projected to increase $35 million to $45 million
• Raw products costs - projected to increase $175 million
• Other costs - projected to increase $35 million to $45 million

The company has implemented price increases that have significantly helped reduce the impact of these costs. In a conference call regarding the earnings, Chief Financial Officer Dave Meyers spoke about the raised prices. "In Q2, we realized the benefit of our aggressive pricing, as pricing fully offset net cost increases for the full portfolio," he said. "In Consumer, pricing exceeded cost increases, while Pet realized a lag due to timing of implementing pricing actions. Looking to the second half of our fiscal year, we continue to expect that pricing will fully offset net cost increases, with the vast majority of pricing action already reflected on the shelf."

The company recently completed the expansion of a pet food plant in Topeka, Kansas. The total investment value of the project was an estimated $26 million. The expansion, originally planned for completion in 2009, was finished ahead of schedule and wrapped up this summer. Del Monte has scheduled a maintenance turnaround at the nearby pet food plant in Lawrence, Kansas, in June of next year. Information on these and other projects can be found in Industrial Info's North American Industrial Database.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.