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Conagra Brands reports fourth quarter results and quarterly dividend
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Monday, 29 July, 2024, 13 : 00 PM [IST]
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Chicago, USA
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Conagra Brands, reported results for the fourth quarter and full year fiscal year 2024, which ended on May 26, 2024. All comparisons are against the prior-year fiscal period, unless otherwise noted.
Sean Connolly, president and chief executive officer of Conagra Brands, said, “Our investments in our brands continued to yield results, and again drove volume improvement in our Domestic Retail business. Progress was most notable in our key Frozen and Snacks domains, where we also saw market share gains. Additionally, our supply chain productivity initiatives enabled us to expand adjusted gross margins, and we continued to strengthen the balance sheet and reduce our net leverage ratio. Looking ahead, we expect a gradual waning of the challenging industry trends seen throughout fiscal year 2024, as consumers adapt and establish new reference prices. We will continue to invest wisely to support our brands and facilitate that process.”
The 2.4% decrease was driven by a 0.6% negative impact from price/mix, largely driven by the company’s strategic investments in the quarter, and a 1.8% decrease in volume, primarily due to continued lower consumption trends.
Gross profit was $805 million in the quarter and adjusted gross profit was $803 million, which was flat to prior year, driven by higher productivity and the negative impacts of lower organic net sales, cost of goods sold inflation and unfavourable operating leverage. Gross margin increased 135 basis points to 27.7% in the quarter, and adjusted gross margin increased 62 basis points to 27.6%.
Selling, general, and administrative expense (SG&A), which includes advertising and promotional expense (A&P), increased 87.4% to $1.4 billion in the quarter, primarily due to $957 million of goodwill and brand impairment charges and a 5.6% increase in A&P. Adjusted SG&A, which excludes A&P, was flat to the prior year at $300 million.
Net interest expense was $105 million in the quarter. Compared to the prior-year period, net interest expense decreased 3.1% or $3 million due to a reduction in total debt. The average diluted share count in the quarter was 480 million shares.
In the quarter, net loss attributable to Conagra Brands was $567 million, or $1.18 per diluted share. Adjusted net income attributable to Conagra Brands was $294 million, or $0.61 per diluted share.
Adjusted EBITDA, which includes equity method investment earnings and pension and postretirement non-service income, was $577 million in the quarter.
For the full fiscal year, gross profit increased 2.1% to $3.3 billion and adjusted gross profit increased 0.3% to $3.3 billion as higher productivity more than offset the negative impacts of cost of goods sold inflation, lower organic net sales, and unfavourable operating leverage. Gross margin increased 107 basis points to 27.7% and adjusted gross margin increased 58 basis points to 27.7%. For the full fiscal year, EPS decreased 49.3% to $0.72 and adjusted EPS decreased 3.6% to $2.67.
Reported and organic net sales for the Grocery & Snacks segment decreased 2.1% to $1.2 billion in the quarter driven by a price/mix increase of 1.5%, offset by a volume decrease of 3.6%. Price/mix was driven by favourability in inflation driven pricing and the volume decrease was driven by the elasticity impact from the inflation-driven pricing actions and continued lower consumption trends. In the quarter, the company gained unit share in snacking categories including microwave popcorn and seeds, and some staples categories including chili and cooking sprays.
Operating profit for the segment increased 12.6% to $175 million in the quarter and adjusted operating profit increased 8.9% to $255 million as higher productivity and lower SG&A more than offset the negative impacts of lower organic net sales, cost of goods sold inflation, and increased A&P. In addition, the Company received a $7 million net benefit related to insurance proceeds for prior year lost sales from its canned meat recall.
Reported and organic net sales for the Refrigerated & Frozen segment decreased 3.8% to $1.2 billion in the quarter driven by a price/mix decrease of 4.7%, partially offset by a volume increase of 0.9%. Both price/mix and volume were driven by the impacts of brand-building investments. In the quarter, the company gained unit share in categories such as frozen single serve meals, frozen sides, and frozen vegetables.
Operating loss for the segment was $713 million in the quarter as a result of the goodwill and brand impairment charges outlined above. Adjusted operating profit decreased 13.1% to $190 million as higher productivity was more than offset by the negative impacts of lower organic net sales, cost of goods sold inflation, and increased SG&A.
On an organic net sales basis, price/mix increased 0.2% and volume increased 4.1% primarily driven by a strong performance in the company’s Mexico and global exports businesses. Operating profit for the segment increased 26.7% to $26 million in the quarter and adjusted operating profit decreased 15.6% to $29 million as the benefits from higher organic net sales and productivity were more than offset by the negative impacts of cost of goods sold inflation, increased SG&A, and isolated issues in the Canadian manufacturing facilities.
Reported and organic net sales for the Foodservice segment decreased 3.9% to $291 million in the quarter driven by a price/mix increase of 6.4% and volume decrease of 10.3% due to the ongoing impact of previously disclosed lost business and ongoing softness in restaurant traffic.
Operating profit for the segment increased 25.9% to $40 million and adjusted operating profit increased 39.9% to $40 million in the quarter as the benefits of higher productivity and lower SG&A more than offset the negative impacts of lower organic net sales, cost of goods sold inflation, and unfavourable operating leverage.
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