PARSIPPANY, N.J. — B&G Foods, Inc. may not have kept up with its growth track record over the past two years, but the company’s top executive believes results turned in during the third quarter of fiscal 2019 show the company is making the necessary improvements to once again achieve short- and long-term goals.
Speaking to analysts during an Oct. 31 conference call, Kenneth G. Romanzi, president and chief executive officer of B&G Foods, Inc., highlighted six keys at the company.
First, the ongoing integration of Clabber Girl is proceeding well. Second, the company recently completed the largest debt refinancing in its history at attractive interest rates. Third, product innovation continues to be successful. Fourth, B&G has been able to achieve price increases in a difficult marketplace. Fifth, the company is experiencing increasing momentum behind its cost-savings initiatives projected to be $20 million for the year. And sixth, there has been continued strengthening of its organizational capability, including organizational redesign, personnel enhancements and system improvements.
In the third quarter ended Sept. 28, B&G Foods had net income of $31,088,000, equal to 48c per share on the common stock, down narrowly from $31,988,000, or 49c per share, in the prior-year period.
Adjusted net income was $34,882,000, or 54c per share, down from $37,472,000, or 57c, when excluding items affecting comparability.
Net sales in the latest quarter totaled $406,311,000, down 4% from $422,602,000 a year ago. The decline was due in part to the divestiture of Pirate Brands, partially offset by the acquisitions of McCann’s and Clabber Girl.
Base business net sales for the quarter declined 2.5% to $385,900,000, helped by an increase in net pricing that was offset by a decrease in unit volume.
Net sales of Maple Grove Farms and New York Style increased 8% and 3%, respectively, during the quarter, while sales of Green Giant fell 5%. Net sales of B&G’s spices and seasonings brands declined 3% during the third quarter, while sales of Victoria dropped 4%.
In the case of Green Giant, it was the first time in seven quarters that the brand hasn’t shown growth. Mr. Romanzi said the decline reflected supply shortages on corn-on-the-cob products from the poor crop in 2018, as well as a later date for the Canadian Thanksgiving. He said B&G expects a rebound in Green Giant during the fourth quarter.
“We believe the real driver of expected Green Giant growth in the fourth quarter will come from our 2020 innovation product launches that have already begun shipping to customers that represent about one-third of the A.C.V.,” he said. “We’re very excited about these products. They include Green Giant Pizza with Cauliflower Crusts, Green Giant Cauliflower & Spinach Gnocchi, Green Giant Vegetable Hash Browns, building off the terrific success of our Green Giant Veggie Tots, and Green Giant Marinated & Grilled Vegetables. As part of our continuing mission to make Green Giant the plant-based food brand of the future, these innovative new products will expand Green Giant’s reach into areas of the frozen food case beyond vegetables, including frozen potatoes, frozen pizzas and frozen pasta. And in 2020, we expect Green Giant will continue to expand its reach both in the frozen food case and the dry grocery area of the store. So, the outlook for Green Giant continues to be a very bright green.”
Net income for the first nine months of the year totaled $66,130,000, or $1.01 per share, up 9% from $60,511,000, or 91c. Net sales eased to $1,190,242,000 from $1,242,709,000.
Even though B&G delivered on the high end of its budgeted pricing and cost savings, Mr. Romanzi said the company is lowering its full-year adjusted EBITDA guidance to $295 million to $310 million.
“This reduction is primarily driven by two factors: one, higher Green Giant 2019 vegetable pack costs and the acceleration of the use of the new more expensive pack due to last year’s short vegetable crop that did not last as far into the calendar year as it normally does; and two, higher import tariffs, particularly garlic, and the effect of steel tariffs on domestic steel pricing,” he said. “While we had increases in those for the year budgeted, the increases are coming in higher.”