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ConAgra's profit beats on higher prices, less discounting
September 29, 2016 / 12:06 PM / a year ago

ConAgra's profit beats on higher prices, less discounting

(Reuters) - ConAgra Foods Inc (CAG.N), the maker of Chef Boyardee pasta and Hunt’s ketchup, reported a quarterly profit that handily beat analysts’ estimates as it raised prices on some products and discounted less.

ConAgra Foods production facility is seen in Oakdale, California, December 18, 2015. REUTERS/Fred Greaves/File Photo

The company’s shares rose as much as 8.2 percent to $46.67 in morning trading.

The packaged foods maker has been trying to boost profits by promoting higher-margin products and clamping down on unprofitable volume sales to retailers.

ConAgra said on Thursday it stopped promoting brands such as Chef Boyardee and Snack Pack at $1 at retailers. It also raised prices on products such as Banquet frozen entrees.

These actions, along with lower commodity costs, drove margins, which rose 2 percentage points to 27.3 percent in the first quarter.

“Locking a brand into a $1 price point for decades it’s just not a good business decision because it puts relentless pressure on margins and food quality ... So the change was long overdue,” a company executive said on a post-earnings call.

Operating margins rose 5 percentage points to 18.4 percent as the company kept a tight lid on costs.

Like rivals Campbell Soup Co (CPB.N) and General Mills Inc (GIS.N), ConAgra is struggling to increase sales and profit margins as consumers move away from packaged foods that are highly processed.

Earlier this week, ConAgra said it would buy Frontera Foods, celebrity chef Rick Bayless’ Mexican food company, as it looks to add more premium brands to its portfolio.

The company is also in the middle of divesting its $3 billion Lamb Weston potato business and sold its spicing and flavoring business for more than $300 million earlier this year.

    The Lamb Weston business reported a 4 percent rise in net sales in the quarter ended Aug. 28.

    Net income attributable to the company was $186.2 million, or 42 cents per share, compared with a loss of $1.15 billion, or $2.68 per share, in the same period a year earlier.

    The company booked a $1.32 billion loss from discontinued operations in the year-earlier period after selling its loss-making private-brands business to TreeHouse Foods Inc (THS.N).

    Excluding one-time charges and discontinued operations, ConAgra earned 61 cents per share, above the average analyst estimate of 48 cents, according to Thomson Reuters I/B/E/S.

    Sales, however, fell 4.6 percent to $2.67 billion, missing analysts’ estimate of $2.73 billion, hurt by lower demand for its grocery, snacks and frozen food items.

    Reporting by Gayathree Ganesan in Bengaluru; Editing by Anil D'Silva and Maju Samuel

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