A “unique window” of possibility is perceived by Conagra Companies.
Chicago – Conagra Brands is determined that demand will not return to what it was prior to the pandemic. The management’s goal is to keep demand levels above pre-COVID-19 levels even as the demand surge brought on by the coronavirus (COVID-19) and the ensuing instructions to stay at home fades.
During a June 30 conference call to discuss fiscal 2020 results, president and chief executive officer Sean M. Connolly stated, “We have chosen to bolster the long-term earnings potential of our company, rather than simply accepting the elevated demand as transitory and focusing on maximising near-term margins.” We think that the changing landscape we are operating in offers a rare chance to sustain the current momentum and optimise our long-term value-creation potential. In order to facilitate such, we must investments concentrated on taking all necessary steps to guarantee the tangible availability of our products.
Mr. Connolly went into further detail on how COVID-19 is expected to impact customers going forward.
According to him, “people are genuinely rediscovering certain things in their homes, like their kitchens, freezers, and spending time with each other,” and they appreciate it. Additionally, they’re learning that a few of the things they had assumed to be true had in fact undergone significant alteration. Take the quality of frozen food, for instance.
When you combine the two, it is evident that customers are pleasantly surprised by what they find when they cook at home. Furthermore, considering the enormous benefits of cooking at home and the fact that we are currently experiencing a recession, it is quite possible that these dynamics will continue for some time, especially considering how frequently the news is updated regarding COVID and the status of positive cases.
Future investment priorities include expanding industrial capacity, guaranteeing the efficiency of the supply chain, e-commerce, and product innovation. As an illustration, Mr. Connolly stated that Conagra’s Birds Eye brand reached its capacity limit during the quarter and that the business is making investments to make sure it doesn’t occur again.
He declared, “These supply chain improvements will enable us to effectively meet the increased demand we are seeing today and anticipate seeing in the future.” “That investment is exemplified by this.”
The increased demand had a significant effect on the business’s success in the company’s fiscal 2020, which concluded on May 31. To $842 million, or $1.72 per share of common stock, net income increased by 24% Sales in fiscal 2020 increased 16% to $11 billion.
With the exception of Conagra Brands’ Foodservice business unit, three other business units experienced double-digit growth in sales: Grocery & Snacks and Refrigerated and Frozen Foods.
Sales of chilled and frozen food increased by 22% to $4.6 billion in the course of the year. Conagra’s frozen food division increased market share in the fourth quarter, according to Mr. Connolly, and he believes there is still potential for growth as the business resolves capacity concerns related to the Birds Eye Brand.
Sales of groceries and snacks increased by 18% to $4.6 billion in the year. Sales of snacks increased by 20% and sales of grocery products by 46% in the fourth quarter.
Mr. Connolly stated, “These businesses are proving to be a distinct benefit to our portfolio.” But even though we’re happy with we are especially enthusiastic about what the quarter has told us about the opportunity that lies ahead as consumers have changed their behaviours and eating habits, especially in light of our performance for the quarter and the year.
Foodservice sales decreased 6% to $952.4 million during the year, while sales of the international business section increased 7% to $881 million.
The management only provided guidance for the first quarter of fiscal 2021, citing market volatility.
Mr. Connolly stated, “We hope to be in a position to give you a further update on our outlook when we report Q1 results.” “We anticipate knowing a lot more by then, even though we don’t think the next few months will bring about as much change as the previous few have.”
The business anticipates Compared to the first quarter of fiscal 2020, first-quarter revenues are expected to increase by 10% to 13%, and adjusted profits per share are projected to be between 54½ and 59¢.
The chief financial officer, David S. Marberger, stated, “We expect the elevated retail demand to continue into Q1 although at a lower rate than Q4 leading us to our Q1 organic net sales expectation of plus 10% to plus 13%.” “We still anticipate that the higher volumes in Q1 will provide favourable operating leverage, offsetting the additional costs associated with COVID-19.”
Knowing when demand will start to decline and when retailers will start to replenish their inventory makes forecasting challenging, according to Mr. Connolly.
Naturally, the question is, “When will that happen?” he posed. “Demand has been observed.” sluggish lately, but it’s still at really high numbers.
You also heard me mention that while we are investing to expand our capacities, there is a limit to how far we can go in that direction. We are therefore running at full speed for the foreseeable future. And a large portion of what we produce and send out of our factories is consumed directly by the customer. One of the unpredictable wildcards is when that slows down and inventory levels start to rise again.