ConAgra Foods reports 26% increase in Q3 net earnings

US packaged foods company ConAgra Foods has reported 26% jump in net income to $271.6m in 2012, compared to $214.8m a year earlier, helped by lower taxes and cost savings.

Excluding acquisition-related gains and charges and insurance matters, adjusted earnings from continuing operations were $0.51 per share in the third quarter ended on 26 February from $0.51 per share in 2011.

Like several food companies, ConAgra also been affected by rising costs of raw materials. The company passed some of these costs to consumers through price increases, which helped revenue climb 7.4% to $3.37bn, but it also hurt sales volume.

ConAgra chief executive Gary Rodkin said that conditions have been difficult across the industry due to high inflation and soft volumes for retail consumer food brands.

"Our Lamb Weston potato business performed well, and we benefited from total margin management efforts that include price increases in both operating segments and good overall cost savings," Rodkin added.

The consumer foods division, which contributes 63% of total sales, posted 4% growth in sales to $2.15bn, as a result of 5% contribution from price increase and 4% contribution from recent acquisitions, which in turn was offset by 5% decline in organic volume.

Under this division, brands that posted sales growth include ACT II, Chef Boyardee, DAVID, Marie Callender’s, Orville Redenbacher’s, PAM, Peter Pan, Reddi-wip, Slim Jim and Wesson.

The commercial foods segment, which sells potato products, seasonings and milled grain products to restaurants and other commercial channels, saw sales jump by 14% to $1.21bn.

The increase in sales is a result of commodity-driven price increases, higher sales volumes for its Lamb Weston potato business, and pass-through of higher wheat costs in the milling business.

Rodkin added that the company will continue its focus on deploying cash in ways that create long-term value.

ConAgra plans to use $640m in cash on hand, either through share repurchase or by acquiring food companies across the globe, in categories where it already operates or in private-label segment.

Meanwhile, as business conditions are expected to remain difficult, the company has lowered its Q4 outlook and expects ‘modest’ earnings growth in the single-digit rate. For the full year it expects low to mid-single-digit rate of growth.

Image: ConAgra has been affected by rising costs of raw materials and passed some of these costs to consumers through price increases. Photo: ConAgra Food