PARSIPPANY, N.J. — Having found success with Wish-Bone product introductions in 2016, Pinnacle Foods, Inc. hopes to do the same with its Duncan Hines brand this year. The Parsippany-based company plans to launch a “Perfect Size for One” baking mix in the second quarter, said Mark Clouse, chief executive officer of Pinnacle Foods, in a Feb. 23 earnings call.
The new Duncan Hines mix may be baked in a coffee mug in the microwave in 1 minute, he said. The 18-variety platform will offer varieties across all dayparts.
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| Mark Clouse, c.e.o. of Pinnacle Foods |
“As you know, the baking category has faced a number of structural challenges, including the decline in household size and consumer concerns regarding portion control as well as aggressive competitive pricing at the low end of the category,” Mr. Clouse said. “Our strategy continues to be focused on innovating at the premium higher end of the category, rather than battling strictly on price at the low end.”
Pinnacle Foods, in February 2016, launched Wish-Bone E.V.O.O. dressings, which feature a higher amount of extra virgin olive oil than most mainstream dressings, and Wish-Bone Ristorante Italiano, which are restaurant-inspired dressings. The new products helped sales of Wish-Bone improve in the second half of fiscal-year 2016.
Mr. Clouse said of E.V.O.O., “It is a combination of the fact that that transparent ingredient line and the relevance of that being moved into mainstream location and broader distribution is working very effectively.”
Pinnacle Foods on Feb. 23 reported net earnings of $211,117,000, or $1.81 per share on the common stock, in the fiscal year ended Dec. 25, 2016, which was down slightly from $212,508,000, or $1.83 per share, in the previous fiscal year.
Fiscal-year net sales grew nearly 18% to $3,127,938,000 from $2,655,792,000 in the previous fiscal year, almost entirely driven by a 17.7% benefit of the Boulder Brands acquisition.
“This acquisition was flawlessly integrated into the business within seven months, and acquisition synergies anticipated at the time of the transaction were delivered in 2016 and are tracking on plan for 2017,” Mr. Clouse said. “In addition, as communicated previously, we’ve identified an incremental $4 million to $6 million of synergies that are expected to benefit 2018. All-in, our original synergy forecast of $30 million has grown to $34 million to $36 million through 2018.”
In its outlook for fiscal-year 2017, Pinnacle Foods expects adjusted diluted e.p.s. of $2.55 to $2.60. The extra weeks of Boulder Brands ownership added $22 million in net sales in January 2017. Pinnacle Foods expects capital expenditures for the full year to be in the range of $120 million to $130 million.
Pinnacle Foods on Feb. 10 said it was reorganizing its financial reporting structure into four segments: Frozen, Grocery, Boulder and Specialty. Pinnacle Foods on Feb. 23 provided historical results under the new structure for fiscal-year 2014, fiscal-year 2015 and its four quarters, and the first three quarters of fiscal-year 2016.
Within Grocery, Earnings Before Interest and Taxes (EBIT) advanced nearly 13% to $229,155,000 from $203,146,000 in the previous fiscal year, reflecting net sales growth, strong productivity and favorable margin mix. Input cost inflation partially offset the EBIT drivers.
Fiscal-year net sales in Grocery increased 6.3% to $1,089,270 from $1,024,269, reflecting a 9.7% benefit from the Boulder Brands acquisition that was offset partially by lower volume/mix of 3.3% and lower net pricing of 0.1%.
Adding the Smart Balance brand to the Grocery portfolio and the continued strength of Armour canned meat helped to lift sales. Lower sales in Duncan Hines baking products and Wish-Bone salad dressings partially offset the growth, although Wish-Bone sales improved in the second half of the year.
Within the Frozen segment, EBIT increased more than 10% to $240,919,000 from $218,536,000 in the previous fiscal year, reflecting net sales growth and strong productivity, partially offset by input cost inflation, an investment in converting to Birds Eye Steamfresh stand-up packaging and the unfavorable impact versus year ago of items affecting comparability.
Fiscal-year net sales in Frozen increased 5.6% to $1,304,791,000 from $1,235,951,000, reflecting a higher volume/mix of 2.9%, increased net price realization of 0.8% and a 2.1% benefit from the Boulder Brands acquisition. Unfavorable foreign currency translation of 0.2% partially offset the growth.
Net sales for the Birds Eye franchise increased 8% due to new varieties in the Birds Eye Flavor Full, Birds Eye Protein Blends and Birds Eye Disney-themed platforms as well as Birds Eye Veggie Made Rice and Birds Eye Signature Skillet Meals platforms. Ten new varieties were introduced in the Hungry-Man Selects line in the fiscal year.
Lower sales in the seafood business, Aunt Jemima breakfast products and Lender’s bagels offset the growth.
Within the Boulder segment, EBIT was $9,096,000, which compared to losses before interest and taxes of $5,498,000 in the previous fiscal year. The EBIT in 2016 reflected the benefit of the Boulder Brands acquisition in January of 2016, partially offset by items affecting comparability largely related to acquisition integration in both years.
Fiscal-year net sales for the Boulder segment increased to $364,716,000 from $41,494,000 as the gardein brand recorded double-digit growth. Pinnacle Foods is bringing new capacity for gardein on-line at a Hagerstown, Md., plant, Mr. Clouse said.
Within the Specialty segment, EBIT in the fiscal year dropped 6.1% to $32,263,000 from $34,369,000. Lower margins in the legacy Specialty business and the unfavorable impact versus year ago of items affecting comparability more than offset increased net sales from the Boulder Brands acquisition.
Fiscal-year net sales in the Specialty segment increased 4.3% to $369,161,000 from $354,078,000, driven by a 9.1% benefit from the Boulder Brands acquisition.
Pinnacle Foods companywide in the fourth quarter reported net earnings increased 11% to $88,144,000, or 75c per share on the common stock, from 79,195,000, or 68c per share. Fourth-quarter net sales increased nearly 19% to $858,481,000 from $722,478,000.
