ConAgra swings to loss on impairment charges

by Eric Schroeder
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Sean Connolly, CEO of ConAgra Foods
Sean Connolly, CEO of ConAgra, said the company is off to a strong start in fiscal 2016.

OMAHA – ConAgra Foods Inc. sustained a loss of $1.24 billion in the first quarter of fiscal 2016, which compared with income of $482.3 million in the same period a year ago. Earnings were dragged down by an impairment charge totaling $1.95 billion pretax on the company’s private label operations, which ConAgra earlier this summer said it is selling.

Revenues, meanwhile, increased 1.1 percent to $2.79 billion from $2.763 billion a year ago.

“We are off to a strong start in fiscal 2016,” said Sean Connolly, CEO. “While early days, we are making good progress against our plan to drive margin improvement within a more focused portfolio. In the near term, we expect to grow profits modestly in fiscal 2016 across the Consumer Foods and Commercial Foods segments by building on the stronger foundations established last fiscal year, with an emphasis on improving price/mix and implementing relentless cost discipline.

“Our entire organization is focused on delivering long-term top- and bottom-line improvement. Rigorous portfolio segmentation work and improving innovation capabilities should benefit our top line over time, and we are in the midst of developing aggressive cost savings plans to drive improved SG&A (selling, general and administrative expenses), trade spend efficiency and COGS (costs of goods sold). We are confident in our ability to unlock long-term value as we execute our plans to become a leaner, more focused company.”

Operating profit in the Consumer Foods segment totaled $241.5 million in the first quarter, up 25 percent from $193.1 million in the same period a year ago. Sales eased 0.3 percent to $1.697 billion from $1.703 billion.

“In fiscal 2016, the Consumer Foods segment is focused on continuing to strengthen its core business by emphasizing its highest-potential brands, focusing on the most promising sales channels, expanding margins, and getting more brands ready for stronger marketing support in the future,” the company said. “The segment is showing early progress.”

In the Commercial Foods segment, operating profit increased 17 percent to $138.8 million from $118.9 million, while sales rose 3.5 percent to $1.097 billion from $1.06 billion.

“All major business lines in the segment posted comparable profit growth,” ConAgra said. “Lamb Weston made the most significant contribution to the segment’s profit increase, reflecting its strong sales performance, favorable mix, and operating efficiencies from good raw potato crop quality.”

Looking ahead, ConAgra said it plans to offer more details on fiscal 2016 earnings-per-share guidance once it is further along in divesting its private label operations, determining associated SG&A reduction targets, and finalizing investment levels for the remaining segments. The company said it expects the Consumer Foods and Commercial Foods segments to post modest comparable operating profit growth for the full fiscal year.

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