ConAgra Foods Inc.'s (CAG) fiscal fourth-quarter earnings more
than doubled, beating analysts' estimates, as price increases
helped mitigate higher costs.
The packaged food company expects current-quarter earnings to
fall below the 34 cents a share earned in the year-earlier first
quarter, with high input costs and difficult economic conditions
expected to continue in fiscal 2012. Analysts surveyed by Thomson
Reuters currently expect earnings of 36 cents a share for the
quarter.
"Overall marketplace and economic conditions remain challenging,
as our consumer foods segment incurred 9% cost inflation this
quarter," said Chief Executive Gary Rodkin. "We are, however,
demonstrating progress in some key areas of our business. Net
pricing has begun to improve in consumer foods sales, cost savings
are on track, and Lamb Weston and flour milling operations are
delivering stronger results for our commercial foods segment."
He said additional pricing actions are underway.
Like many consumer-product companies, ConAgra's margins have
been squeezed by increased costs for raw materials. The maker of
Healthy Choice meals, Slim Jim meat snacks and Reddi-wip said it
would raise prices on 90% to 95% of its portfolio by the end of the
fourth quarter and hoped to lower operating costs enough to match
growing commodities inflation.
Also looking to expand its presence in the private-label food
business, ConAgra last month raised its offer for Ralcorp Holdings
Inc. (RAH) to $4.9 billion, but Ralcorp rejected the deal. A merger
would create the third-largest U.S. packaged-food company by
sales.
For the quarter ended May 29, ConAgra reported a profit of
$254.9 million, or 61 cents a share, up from $90.6 million, or 20
cents, a year earlier. Excluding items such as restructuring
charges, earnings from continuing operations rose to 62 cents a
share from 27 cents. Sales rose 5.3% to $3.21 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of 48 cents on revenue of $3.19 billion.
Gross margin fell to 22% from 24.2%.
Sales in ConAgra's consumer-foods unit, its biggest by revenue,
edged up 0.6% as operating profit increased 62% though organic
volume declined 3%. The smaller commercial-foods segment's sales
jumped 15% as profit rose 14%.
Shares closed at $25.42 and were inactive premarket. The stock
has risen 3% over the past year.
-By Melodie Warner, Dow Jones Newswires; 212-416-2283;
melodie.warner@dowjones.com