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ConAgra Reports Strong Second-Quarter Growth

24 December 2012

US - ConAgra Foods has reported diluted EPS from continuing operations of $0.51 in the fiscal second quarter, up 19 per cent over $0.43 earned in the year-ago period.

Excluding $0.06 of net expense in both the current quarter and the year-ago period from items impacting comparability, current quarter EPS of $0.57 was 16 per cent above the comparable $0.49 earned in the year-ago period.

Gary Rodkin, ConAgra Foods’ chief executive officer, said: “We are pleased that both of our segments posted operating profit growth in the midst of current economic conditions. Effective margin management initiatives, moderating input cost inflation, the benefit of acquisitions, and good results from our potato operations are collectively driving high-quality EPS growth.

"We are very excited about the pending acquisition of Ralcorp, which we announced on 27 November 2012, given the strategically and financially compelling nature of the acquisition. The acquisition is expected to close in the first quarter of calendar 2013, and we look forward to updating our investors on the financial benefits of the acquisition in due course.”

Consumer Foods Segment

The Consumer Foods segment posted sales of $2,423 million and operating profit of $286 million for the second quarter. Sales increased 11 per cent, reflecting 11 per cent contribution from acquisitions, four per cent favorable price/mix, and a four per cent organic volume decline. Sequentially, organic volume improved by a slight amount (on an unrounded basis).

Operating profit of $286 million grew 12 per cent over $256 million in the year-ago period, as reported. After adjusting for $7 million of net expense in the current period, and $15 million of net expense in the year-ago period, from items impacting comparability, current-quarter operating profit of $293 million increased eight per cent over the comparable $271 million a year ago. Marketing investment for the base business (excluding recently completed acquisitions) increased 18 per cent, reflecting the company’s planned commitment to building long-term brand strength. Operating profit growth was driven by a combination of favorable price/mix and other margin management initiatives, moderating inflation, and contribution from completed acquisitions.

The company currently expects full fiscal year productivity savings to exceed $250 million for this segment and for input cost inflation to be approximately two to three per cent.

Commercial Foods Segment

Sales for the Commercial Foods segment were $1,312 million, five per cent above year-ago period amounts. The growth primarily reflects favorable price/mix and good volumes for the Lamb Weston potato operations, which posted notable success in international markets. To a lesser extent, the sales growth also reflects the pass-through of higher wheat costs in terms of higher flour prices for the milling operations. The overall segment remains focused on top-line growth through innovation, improving product mix with higher-margin items, and strong alignment with high-potential customers.

Segment operating profit was $169 million, 5 per cent above year-ago period amounts as reported, reflecting the sales growth as well as a continued focus on productivity and cost-saving initiatives. Lamb Weston drove the overall segment’s profit growth, while flour milling profits were below year-ago period amounts, as planned, due to the very strong performance in the same period a year ago.

Hedging Activities – This language primarily relates to operations other than the company’s milling operations.

The company recorded $16 million of net hedging loss in the current quarter, and $27 million of net hedging loss in the year-ago period, as unallocated Corporate expense. The company identifies these amounts as items impacting comparability. Hedge gains and losses are aggregated, and net amounts are reclassified from unallocated Corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold.


Based on the strong performance in the first half of the fiscal year, the company now expects fiscal 2013 diluted EPS to be at least $2.06, adjusted for items impacting comparability; this is an increase from previous expectations of $2.03 - $2.06 on that same basis. This guidance excludes any fiscal 2013 EPS benefit related to the Ralcorp acquisition, which will be quantified in due course after the transaction closes.

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