ConAgra Foods Inc.'s (CAG) fiscal second-quarter earnings fell
14% after being hit with hedging losses. The packaged-food company
also reported its consumer-foods unit was hurt by rising
commodities costs.
However, its smaller commercial foods segment saw
better-than-expected profit growth and adjusted earnings beat
analysts' expectations.
Chief Executive Gary Rodkin said ConAgra was encouraged by its
progress in fighting higher costs in the consumer-foods segment and
that weaker volume was largely as-expected given continuing price
increases. The company remains cautious as a result of continuing
inflationary pressures and the economy's impact on consumers,
Rodkin said.
Sales in ConAgra's consumer-foods unit, its biggest by revenue,
were up 4% though volume declined 1% and operating profit was down
8%.
The smaller commercial-foods segment's sales climbed 16%,
reflecting success at passing on higher wheat costs and higher
operating costs at its Lamb Weston potato operations through higher
prices. Operating profit increased a better-than-expected 26%.
For the quarter ended Nov. 27, ConAgra reported a profit of
$171.8 million, or 41 cents a share, down from $200.9 million, or
45 cents a share, a year earlier. Excluding hedging costs and other
items, earnings from continuing operations were 47 cents. Revenue
increased 8.1% to $3.4 billion.
Analysts polled by Thomson Reuters most recently forecast
earnings of 43 cents on revenue of $3.33 billion.
Gross margin fell to 22.3% from 24.2% on higher costs.
ConAgra has been on the hunt for strategic deals to improve its
position in international markets, private-label foods and other
branded food categories after giving up its pursuit of Ralcorp
Holdings Inc. (RAH) in September. The maker of brands such as
Healthy Choice, Slim Jim and Reddi-wip in recent months has
increased its stake in Agro Tech Foods Ltd. (500215.BY) and agreed
to acquire National Pretzel Co.
Shares of ConAgra, which affirmed its guidance for the current
fiscal year, closed Monday at $25.17 and were inactive premarket.
The stock is up 11% this year.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com