Campbell Soup reports drop in Q3 profit

US food company Campbell Soup has reported a 5% decline in net earnings in the third quarter of fiscal 2012 to $177m from $187m in 2011 amid lower soup sales and higher ingredient costs.

The company had to raise prices to offset higher commodity costs but margins were affected by declining volumes in key categories, increased advertising and consumer promotion expenses.

Net sales in the quarter ended 29 April 2012 increased marginally to $1.82bn compared to $1.81bn in the same period in 2011.

Campbell’s president and chief executive officer Denise Morrison said that although the overall sales trends are improving, the company’s performance was not satisfactory.

"We executed well in some businesses, delivering solid sales growth in US Beverages, Pepperidge Farm and Canada. We did not execute as well in others," Morrison added.

Campbell’s US Simple Meals segment, which combines the soup and sauces businesses, reported a 2% decrease in sales to $567m, with US Soup sales registering a 3% decline compared to 2011. US Simple Meals operating earnings dropped 14% to $120m, due to cost inflation, lower volumes and higher advertising costs.

The Global Baking and Snacking segment, which combines Pepperidge Farm baked products and Arnott’s biscuits, reported a 3% rise in sales to $543m, while operating earnings declined 11% to $73m, due to increased promotional spending and cost inflation.

The International Simple Meals and Beverages segment reported a 1% drop in sales to $349m, while operating earnings decreased 11% to $37m, due to lower earnings in the Asia Pacific region.

North America Foodservice division sales totalled $154m, which was comparable to 2011, while the operating earnings fell $2m to $20m, due to decrease in gross margin percentage.

The US Beverages division, which offers vegetable juices and juice beverages, saw a 5% jump in sales to $208m, while the operating earnings settled at $45m from $54m in 2011.

Campbell said that it is on track to invest $100m this year on advertising, introducing new products, and research and development across its product lines in order to boost sales.

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Image: In Q3 of fiscal 2012, Campbell Soup had to raise prices to offset higher commodity costs but profit was affected by declining volumes in key categories, increased advertising and consumer promotion expenses. Photo: Coolcaesar