Tree House overcomes disruptions in the supply chain and recall.
Oak Brook, Illinois. In order to produce earnings and sales growth in the third quarter, TreeHouse Foods, Inc. overcame a voluntary product recall in its broth company and a supply chain interruption with a packaging partner in its pretzel and cookie businesses late in the quarter. Weaker co-manufacturing, food-away-from-home sales, and lower-than-expected consumption in a few retail categories—most notably retail crackers—were other issues straining operations.
The third quarter of fiscal 2022 concluded on September 30, with net profits of $7.1 million, or 13¢ per share on the common stock. This was in contrast to a $90.5 million loss during the same period the previous year. In the most recent quarter, net income from continuing operations was $9.8 million, as opposed to a loss of $12 million during the same time last year. In the meanwhile, TreeHouse reported a $2.7 million loss from discontinued operations in the most recent quarter, down from a $78.5 million loss the previous year. This was mainly because the company sold off a sizable chunk of their meal preparation business.
Sales increased 3.6% during the quarter to $863.3 million from $832.9 million in the previous year. The purchase of the Coffee Roasting Capability, advantageous pricing to counteract commodity inflation, and a rise in retail volume were the main drivers of the growth, with decreases in co-manufacturing and food-away-from-home volume serving as a partial counterbalance. A voluntary product recall and other supply chain problems, according to TreeHouse, negatively impacted a few categories as well.
The third quarter of fiscal 2023 had a 15.9% gross profit as a proportion of net sales, down from 16% in the prior year.
During a conference call with investors on November 6, President and CEO Steven T. Oakland stated, “I’d like to reinforce what we see as the key takeaways for the quarter.” “In spite of disruptions that affected the quarter, we outperformed the larger private brands market in the retail channel and achieved volume growth in our retail business.” Second, we are dedicated to achieving our $250 million savings target over the next three years and are driving margin improvement through TMOS and other supply chain efforts. Third, we are on pace to end the year at our intended $400 million annual run rate, as we have revised our adjusted net sales estimate range and confirmed our adjusted EBITDA outlook. Lastly, We’re still using cash strategically in order to promote long-term wealth generation.
According to Mr. Oakland, “it was not anticipated that the snack bar business would contribute positive adjusted EBITDA this year.” “And while bars might be a wonderful consumer segment, there is relatively little penetration of private brands in this space. Our portfolio is now more concentrated on areas where we believe there is the most potential for the firm going ahead as a result of this divestment.
In a related development, TreeHouse and Bick’s pickle company in Canada came to an agreement in October to buy the former for a base price of around $20 million, mostly related to purchased inventory.
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Mr. Oakland stated, “This transaction expands our presence and scale in Canada and enhances our capabilities in our pickle category.” “TreeHouse and Bick’s have long had a co-packing agreement, and we are happy to add this extra margin-boosting volume to our manufacturing network.”
Considering the future, Chief financial officer Patrick M. O’Donnell stated that the business has updated its full-year net sales forecast, which was previously projected to expand by 7.5% to 9.5% year over year to a range of $3.435 billion to $3.465 billion.
According to him, the revised range “removes the net sales associated with the snack bars business and reflects the company’s continuing operations business.” According to him, the adjustment also considers the effects of the voluntary product recall and supply chain interruption.