WhiteWave delivers solid results ahead of Danone merger

by Monica Watrous
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Earthbound Farm products, WhiteWave Foods
WhiteWave's Earthbound Farm brand experienced declines during the third quarter.

DENVER — Supply chain constraints in The WhiteWave Foods Co.’s salad business spoiled an otherwise strong third quarter for the Denver-based company. Net income in the three months ended Sept. 30 was $58,037,000, equal to 33c per share on the common stock, up from $50,022,000, or 28c per share, in the year-ago quarter. Net sales totaled $1,053,598,000, up 5% from $1,003,888,000.

The results were driven by organic growth and acquisitions within the past year, which were partially offset by Earthbound Farm brand declines and the unfavorable impact of foreign currency translation.

Gregg Engles, WhiteWave
Gregg Engles, chairman and c.e.o. of WhiteWave

“We are pleased with our third-quarter results, despite some execution challenges and a difficult industry backdrop in the quarter,” said Gregg Engles, chairman and chief executive officer. “The growth potential of our categories remains robust, and we are committed to delivering strong financial results for full year 2016.”

Operating income for the Americas Food & Beverage segment increased 27% to $120 million, with sales of $909 million, up 5% from the year-ago quarter. The segment consists of four platforms: Plant-based Foods and Beverages, Fresh Foods, Premium Dairy, and Coffee Creamers and Beverages.

Plant-based Foods and Beverages, which includes Silk, So Delicious and Vega brands, delivered a 10% increase in sales during the quarter behind solid growth of plant-based yogurts and frozen desserts and continued strong growth in plant-based nutritional products. Net sales of Fresh Foods, which consists of the Earthbound Farm brand of organic salads, fruits and vegetables, declined 13% in the quarter as a result of supply chain-related constraints on order fulfillment that affected retail distribution levels.

WhiteWave Foods - Silk, So Delicious, Vega
WhiteWave's Plant-based Foods and Beverages segment, which includes Silk, So Delicious and Vega brands, delivered a 10% increase in sales.

“With our new warehouse, which opened in second quarter 2016, now fully operational, management for this platform is focused on further supply chain enhancements and customer service improvements to rebuild distribution levels and deliver net sales growth in fourth quarter 2016,” the company said.

Sales of Premium Dairy brands, including Horizon Organic and Wallaby, increased 5%. Coffee Creamers and Beverages, which includes International Delight, Dunkin’ Donuts, So Delicious and Land O’Lakes brands, increased sales by 9% behind higher volumes and new product launches.

The Europe Foods & Beverages segment had operating profit of $17 million, down 9% from the year-ago quarter, with sales of $144 million, up 7%.

Blaine McPeak, WhiteWave Foods
Blaine McPeak, executive vice-president and c.o.o. of WhiteWave

“While we are pleased with the strong operating leverage we generated in the third quarter and with our 9% constant currency sales growth excluding Fresh Foods, our overall sales performance in the quarter was impacted by a number of internal execution issues,” said Blaine McPeak, executive vice-president and chief operating officer. “We are implementing the appropriate actions to address these issues to strengthen our operating performance over the coming quarters.

“Our categories remain healthy and on trend with consumer preferences for natural, nutritious, and great tasting products that are responsibly produced. We remain very positive about the long-term growth opportunities across all of WhiteWave’s brands and businesses, particularly in the nascent plant-based categories we are developing in response to strong consumer demand.”

Wallaby and Horizon Organic, WhiteWave Foods
Sales of WhiteWave's Premium Dairy brands, including Horizon Organic and Wallaby, increased 5%.

Net income in the nine months ended Sept. 30 was $152,406,000, equal to 86c per share on the common stock, up from $120,813,000, or 69c, in the same period of the prior year. Net sales advanced to $3,142,941,000, up from $2,838,661,000. For the full year, the company expects to achieve net sales growth of 8.5% and adjusted total operating income growth of 16%.

Greg Christenson, WhiteWave Foods
Greg Christenson, executive vice-president and c.f.o. of WhiteWave

“We continued to generate strong operating results in the third quarter, as we further benefited from our increased scale, historical capital investments, and cost reductions that drove 19% adjusted operating income growth and over 125 basis points of margin expansion on a constant currency basis in the quarter,” said Greg Christenson, executive vice-president and chief financial officer. “We are focused on delivering sharp execution on all our initiatives during the fourth quarter and strong financial results for 2016, including now targeting over 75 basis points of constant currency operating margin expansion for the full year.”

WhiteWave Foods creamers
WhiteWave's Coffee Creamers and Beverages, which includes International Delight, Dunkin’ Donuts, So Delicious and Land O’Lakes brands, increased sales by 9%.

The company continues to move forward in closing its merger with Danone. WhiteWave stockholders during the quarter approved the agreement for Paris-based Danone S.A. to acquire all outstanding shares for $56.25 per share. The deal initially was announced in July and is expected to close in the first quarter of 2017.

“Danone is the ideal strategic partner to enhance our growth trajectory and the global reach of our brands, and to support WhiteWave’s mission to change the way the world eats for the better, which uniquely aligns with Danone’s mission to bring health through food to as many people as possible,” Mr. Engles said. 
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