Sale of trading and merchandising unit boosts ConAgra

by Eric Schroeder
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OMAHA — ConAgra Foods, Inc. posted net income of $442,200,000 in the first quarter ended Aug. 24, equal to 95c per share on the common stock, up 152% from $175,400,000, or 36c per share, during the same period of the previous year. First-quarter results received a 71c-per-share boost from the sale of its trading and merchandising operations. Despite the earnings improvement, ConAgra lowered its earnings outlook for the full year.

Total operating profit rose 4% to $319,900,000 from $307,900,000, while sales for the quarter were $3,065,600,000, up 17% from $2,621,100,000 during the same quarter of the previous year.

ConAgra attributed the sales gain primarily to price hikes in its Consumer Foods segment, which were partially offset by rising commodity costs in the cooking oils, tablespreads and Banquet frozen foods segments.

"We are pleased with the overall sales results in the Consumer Foods segment, the continued profit growth in Commercial Foods, and progress with overall supply chain and S.G.&A. costs," said Gary Rodkin, chief executive officer. "We are disappointed that Consumer Foods posted a decline in comparable operating profit; however, we have already implemented actions that should generate stronger profits for the Consumer Foods business, particularly in the second half of the fiscal year."

In reporting its first-quarter results, ConAgra noted several segment changes. The company has merged the International Foods segment into the Consumer Foods segment and has changed the name of its Food and Ingredients segment to Commercial Foods.

The Consumer Foods segment posted an operating profit of $187,100,000 in the quarter, down 0.1% from $187,300,000 during the previous year. Sales in the quarter were $1,868,400,000, up 9% from $1,711,000,000 during the same quarter of the previous year.

ConAgra said most of the sales gain in Consumer Foods reflected price increases, but 1 percentage point of the growth was due to having sales of Peter Pan peanut butter and Alexia Foods for the entire first quarter, compared with only part of the first quarter of fiscal 2008. The company’s "priority" brands, representing almost 70% of segment sales and including such brands as Chef Boyardee, Egg Beaters and Orville Redenbacher’s, rose 9%. "Enabler" brands, such as Blue Bonnet, Libby’s and Van Camp’s, also rose 9% during the quarter.

The Commercial Foods segment posted an operating profit of $132,800,000, up 10% from $120,600,000 during the same quarter of the previous year. Operating profit included an approximate gain of $5 million related to an asset sale within Gilroy Foods and Flavors.

Sales for the segment were $1,197,200,000, up 32% from $910,100,000 during the previous year. Within Commercial Foods, ConAgra said sales for its milling operations increased due to the pass-through of higher wheat costs as well as improved product mix.

Looking ahead, ConAgra said a combination of volume and inflation expectations as well as increased investments for some brands and categories has led the company to lower its fiscal 2009 outlook to $1.50 per share from a previous range of $1.56 to $1.59 per share.

In early trading on Thursday, ConAgra’s share price was up 2.6% to $19.68 after closing Sept. 17 at $19.17.

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