Gains in margins at Conagra
Executives at Conagra Brands, Inc. are able to rekindle their efforts in product innovation thanks to increasing profit margins.
The third quarter ended on February 26th saw a rise in operating margin of 355 basis points to 15.9% and an increase in adjusted operating margin of 321 basis points to 16.9%. The Chicago-based company’s president and CEO, Sean M. Connolly, reported that the gross profit margin increased for the second consecutive quarter.
In a call with investors on April 5, he reiterated that recovering the margin was the year’s main goal. “Why? Since our innovation programme has been the backbone of our playbook and our ability to sustainably grow the frozen and snack categories—our two strategic emphasis areas—our gross margins support it. As a result of this recovery, you may anticipate an unceasing flow of thought-provoking innovation and assistance with developing your brand going future.
Compared to the third quarter of the prior year, when net income attributable to Conagra Brands was $218 million, or 45¢ per share, it climbed by 56% to $342 million, or 72¢ per share, on the common stock.
From $2.91 billion to $3.09 billion, net sales grew by 6%. Net organic sales increased by 6%. Inflation-driven pricing adjustments resulted in a 15% improvement in price/mix. The elasticity impact of pricing changes and supply chain interruptions caused a 9% fall in volume.
“The strength of our brands, the execution of our pricing strategy, and the limited impact of private label competition are a testament to the modest elasticities, which are well below historic norms and have remained consistent in the face of our inflation-justified price increases,” Mr. Connolly stated.
Conagra revised their fiscal year guidance. Current projections for the company’s adjusted operating margin, adjusted EPS, and organic net sales growth range from 15.5% to 7.5%, 7% to 7.5%, and $2.70 to $2.75, respectively. Prior estimates were $2.60 to $2.70 for adjusted EPS, 15.3% to 15.6% for adjusted operating margin, and 7% to 8% for organic net sales growth.
Third-quarter net sales in the Grocery & Snacks sector rose 3.7% to $1.24 billion. Certain categories experienced manufacturing difficulties that resulted in product stockouts.
“Our canned meals and sides businesses—specifically, canned pasta, canned beans, canned chilli, and canned meat—were most significantly impacted,” Mr. Connolly stated. These products are all part of our supermarket portfolio.Net sales in the Refrigerated & Frozen category rose by 6% to $1.31 billion. The surge was driven by single-serve meals and breakfast sausages, according to Mr. Connolly.
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“During the height of the Lenten season, we experienced a notable disruption in Frozen due to our fish business being on allocation,” Mr. Connolly stated. “As stated in our 10-Q for the second quarter, this was caused by a fire on our fish frying line. Although our volume was limited in Q3 by these isolated challenges, the underlying causes have mostly been addressed, and we anticipate a sequential recovery in volumes going forward.
Net sales in the international segment rose by 8% to $260 million. Foodservice’s net revenues increased 17% to $275 million.