TreeHouse earnings climb sharply in Q3

by Eric Schroeder
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WESTCHESTER, ILL. — Solid unit growth in the North American Retail Grocery business, led by soup, salad dressing, salsa, jams and spreads, sauces and pickles, drove a 153% gain in third-quarter income for TreeHouse Foods, Inc.

For the quarter ended Sept. 30, the company had net income of $28,064,000, equal to 87c per share on the common stock, which compared with income of $11,080,000, or 35 per share, during the same quarter of the previous year. The most recent quarter included a $13.6 million gain on an insurance settlement for fixed assets at the company’s New Hampton, Iowa, facility, and a $2.3 million gain on an intercompany loan with E.D. Smith.

Sales for the quarter were $378,865,000, up 1% from $374,756,000 during the same quarter of the previous year.

For the nine months ended Sept. 30, net income was $59,221,000, or $1.86 per share, up 176% from $21,433,000, or 69c per share, in the same period a year earlier. Net sales were $1,106,866,000, up from $1,102,568,000.

The North American Retail Grocery segment had direct operating income of $36,894,000 in the third quarter, up 28% from $28,713,000 during the same quarter of the previous year. Sales for the quarter were $238,891,000, up 8% from $221,814,000. TreeHouse said sales of pickles increased 9% over the third quarter of 2008, reversing a trend in unit sales.

The Food Away From Home segment had direct operating income of $9,025,000, up 10% from $8,200,000 during the same quarter of the previous year. Sales for the segment were $78,982,000, up 2% from $77,189,000. The company said increased sales of new salsa and cheese products and an expanding customer base helped to offset industry trends.

In a Nov. 3 conference call with analysts, David Vermylen, president and chief operating officer, spoke extensively about the state of the private label industry.

“Whether you measure in volume or dollars, private label is doing very well,” Mr. Vermylen said. “As measured by Nielsen, we’re seeing little change in the performance of private label when we compare 12 weeks to 52-week volume share changes. For salad dressing, soup and non-dairy creamer, private label gains for the latest 12 weeks were higher year-over-year for the most recent 52 weeks. Private label pickle 12-week share gain was slightly below the 52-week rate but still up 1.5 share points.

“Only in salsa have we seen a slowdown in private label share growth, but it was still up 0.5 share points. As measured by Nielsen, our Bay Valley private label dollar sales for the quarter showed soup up 4%, salad dressing up 17%, pickles up 9%, non-dairy creamer up 7% and salsa up 19%. Frankly, since the recession began, the private label share gains we are seeing in our categories are only modestly better than we have seen in prior years.

“We are very comfortable with that performance given that slow steady gains will be far more enduring than short-term spikes. An important point to remember about private label is that we have a great ally in building the business and that is our customer, the retailer.”

Looking ahead to the remainder of 2009, Sam K. Reed, chairman and chief executive officer, said the company is raising its full-year guidance to $2.07 to $2.09 from $2.02 to $2.07.

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