Earnings, sales rise for TreeHouse Foods
Nov. 4, 2011
by Jeff Gelski
OAK BROOK, ILL. — Third-quarter net income for TreeHouse Foods, Inc. came in at $30.4 million, equal to 82c per share on the common stock, which compared with $24.9 million, or 68c per share, in the previous year’s third quarter. Sales for the quarter ended Sept. 30 rose to $528.1 million from $464.2 million due to a 16% sales gain in the North American Retail Grocery segment.
“We achieved all of the financial, operational and strategic objectives that we set out for the quarter, and I am pleased that we improved gross margins sequentially in all of our segments,” said Sam K. Reed, chairman, president and chief executive officer, when the company gave third-quarter results Nov. 4. “The aggressive pricing actions taken earlier this year to offset higher input costs began to yield results, and we remain confident that margins will continue their recovery as the balance of the year unfolds.”
The company reported adjusted third-quarter earnings per share of 85c, which compared with 69c last year. Several unusual items affected the quarterly comparison. A cost of 5c per share was associated with the consolidation of facilities, including the closing of a plant in Springfield, Mo., and the integration of freight and warehouse operations into a consolidated distribution network. An expense of 1c per share was associated with the integration of Sturm Foods and S.T. Specialty Foods. TreeHouse gained 1c per share on the mark-to-market adjustment of the company’s swap agreements and 2c per share on an intercompany note.
Within North American Retail Grocery, third-quarter sales rose to $369.5 million from $319.2 million in the third quarter of the previous year, and third-quarter direct operating income increased to $64.7 million from $60.9 million. Sales of private label foods continued to show growth as both consumers and retailers maintained an emphasis on value products, according to TreeHouse Foods.
The acquisition of S.T. Specialty Foods primarily drove the sales gain. Sales of dressings, non-dairy creamers, jams, spreads and hot cereals rose significantly in the quarter. Powdered drinks and Mexican sauces showed good sales growth. Direct operating income margin in North American Retail Grocery fell to 17.5% in this year’s third quarter from 19.1% in the previous year’s third quarter. Higher freight, input and warehouse start-up costs offset volume increases and pricing actions.
Within the Food Away From Home segment in the third quarter, sales fell to $79.5 million from $83.3 million and direct operating income rose to $13.6 million from $12.8 million. Lower volumes, primarily due to the company leaving the processed pickle businesses, affected sales negatively.
Within Industrial and Export in the third quarter, net sales rose to $79 million from $61.7 million and direct operating income rose to $13.5 million from $8.7 million. Increased pricing and volume of non-dairy powdered creamer and a favorable product mix drove the sales gain.
Companywide for the first nine months of the year, TreeHouse Foods had net income of $64.5 million, or $1.75 per share, which compared with $62.8 million, or $1.75 per share, in the same time period of the previous year. The company reconfirmed its full-year guidance range of adjusted earnings of $2.90 to $3 per share.
“We made great strides in correcting our course over the last quarter,” Mr. Reed said. “We fully expect to continue our strong margin recovery as we enter the holiday season ... We expect to finish the year by delivering the strongest quarterly results in our history.”
He added, “The opportunity for TreeHouse to continue its role as a leading consolidator within the private label segment remains strong and vibrant. As always, we are focused on strategy, category dynamics and go-to-market synergies as we evaluate potential acquisition candidates.”