Del Monte Foods reports Q4 profit over price increases and lower charges

Del Monte Foods has swung to profit in the fourth quarter of 2012 and reported an operating income of $89.3m, compared to a $73.5m loss in 2011, thanks to pricing actions, new products and absence the of takeover-related charges.

However, net sales declined 1.7% to $934.6m in the quarter ended 29 April 2012, compared to $951.2m in 2011, due to decreases in product unit volume. Adjusted EBITDA increased 10.4% to $166m compared to $150.4m year-on-year.

Dave West, Del Monte Foods CEO, said that while the company continues to experience cost inflation similar to the rest of the industry, it is making strategic progress within consumer products.

"We also initiated several company-wide transformational initiatives to strengthen our go-to-market capabilities and drive further growth," West added.

Segment-wise, the company’s consumer products division, which sells vegetable, fruit, tomato and snack products, reported a 8.6% decline in sales to $444.2m, due to a fall in unit volumes.

Operating income decreased 29.3% to $10.4m, as a result of drop in overall sales and higher selling, general and administrative expenses, while adjusted EBITDA increased 17.1% to $52m, driven by higher pricing actions.

In contrast, the company’s pet food product division net sales grew by 5.4% to $490.4m, while operating income increased 24.3% to $92.2m. Adjusted EBITDA increased by 5.9%, to $113.6m.

For the fiscal year 2012, the company’s net sales increased only marginally by 0.3% to $3.67bn, driven by new product volume growth and pricing actions, which was offset by unit volume declines in both divisions. Operating income increased 9.1% from $339.3m, while adjusted EBITDA decreased 10.6% to $590.7m.

In 2011, Del Monte Foods was acquired by an investor group led by funds affiliated with Kohlberg Kravis Roberts, Vestar Capital Partners and Centerview Capital, and has been struggling with high debt costs ever since – its latest debt stands at $35.8bn.