B&G profit rises behind Culver Specialty business
July 20, 2012
by Eric Schroeder
PARSIPPANY, N.J. — Earnings at B&G Foods, Inc. rose 27% in the second quarter while sales increased 15%, boosted in large part by the Culver Specialty Brands business acquired in November 2011. Net income in the quarter ended June 30 was $16,026,000, equal to 33c per share on the common stock, up from $12,599,000, or 26c per share, in the same period a year ago.
Net sales in the second quarter rose to $148,612,000 from $129,453,000. B&G said Culver Specialty Brands contributed $19.5 million in sales during the quarter. Culver, which was acquired from Unilever late last year for about $325 million, includes Mrs. Dash salt-free branded seasoning blends, Molly McButter branded flavored sprinkles, Sugar Twin branded sugar substitute, Bakers Joy branded baking spray and Static Guard branded anti-static spray.
B&G Foods said sales increased $1.5 million for its Ortega brand and $600,000 for Cream of Wheat.
“The significant increase in our net sales, net income, earnings per share and EBITDA during the second quarter reflect our continued success with the Culver Specialty Brands acquisition and our ability to achieve pricing gains in our base business to offset higher costs and volume weakness for the quarter in certain of our brands,” said David L. Wenner, president and chief executive officer. “We remain confident that we will deliver full-year results within our previously announced EBITDA guidance, which at the mid-point of the range reflects a 28% increase over fiscal 2011.”
In a July 19 conference call with financial analysts, Mr. Wenner said the Culver acquisition has added $45.1 million in net sales, slightly ahead of its previously announced guidance of $88 million for the full year.
“Given that new products and new distribution will begin to kick in during the second half, we are hopeful that we will continue to improve on that number by year-end,” Mr. Wenner said. “We are currently launching — working on and launching new products in five of the six Culver brands and should begin launching those products as the second half unfolds.”
Looking at the company’s other brands, Mr. Wenner said Ortega has been a “stellar” brand for B&G Foods.
“Most of (Ortega’s) growth is coming from mass merchants due to new distributions, but we are holding our own at supermarkets as well despite the soft environment there,” he said. “Cream of Wheat recovered nicely in the quarter after a soft first quarter confirming in our opinion that warm weather affected the brand more than anything else in that quarter. Las Palmas had an unusual decline for the quarter, which we are attributing to retailers on the West coast shifting the format of their stores and temporarily disrupting sales at the retailer level. Consumer trends on the brand remain very strong.”
In the conference call with securities analysts, Mr. Wenner said cost saving efforts by retailers has slowed new product introductions, because some retailers have extended their product category reviews to 12 months or more.
“This is more about changing the set within the section to weed out what is not selling and put in new products that hopefully will sell,” he said. “We have seen retailers not only extend it to 12 months, but extend it to well over 12 months.
“In the case of the one instance I was citing it was over two years since that category had been reviewed. That is why it took so long to get Cinnabon (Cream of Wheat) into that retailer. I think it is all about the expense of resetting categories. When you have an awful lot of stores it cost an awful lot per store to strip the shelves down and reset them. That expense is slowing people's inclination down to reset them.”
Mr. Wenner said B&G Foods sees reduced sodium products as an area of growth.
“We have done that with Ortega, for instance, where we have reduced the sodium in our seasoning mixes. Those products are performing very well; selling at about half of the rate of the regular products, which we consider very successful, and also not cannibalizing our regular products. They are additive to our overall sales.
“That is a trend we are going to continue to pursue. We are looking at reducing sodium in a number of the offerings we have out there across a number of brands. And it seems to resonate with consumers. It definitely is something we are going to follow up.”
For the six months ended June 30 net income was $32,804,000, or 68c per share, up 27% from $25,904,000, or 54c per share, in the same period a year ago. Net sales totaled $305,951,000, up 17% from $260,858,000.