ConAgra 1Q profit falls on higher costsOMAHA, Nebraska — ConAgra Foods Inc.'s fiscal first-quarter profit fell 42 percent, partly pressured by higher costs in its consumer foods unit. While the food maker, whose brands include Chef Boyardee and Healthy Choice, maintained its full-year earnings forecast on Tuesday it also expects cost inflation to be worse and said it plans to continue increasing its prices.
OMAHA, Nebraska — ConAgra Foods Inc.'s fiscal first-quarter profit fell 42 percent, partly pressured by higher costs in its consumer foods unit.
While the food maker, whose brands include Chef Boyardee and Healthy Choice, maintained its full-year earnings forecast on Tuesday it also expects cost inflation to be worse and said it plans to continue increasing its prices.
ConAgra and other food companies have had to raise prices as higher costs for ingredients and other raw materials cut into profits. The Omaha, Nebraska company's announcement that it plans more price hikes is not entirely unexpected, as higher costs for ingredients, packaging and fuel are expected to continue to be a challenge for the remainder of the year and possibly further.
ConAgra reported net income of $85.3 million, or 20 cents per share, for the period ended Aug. 28, down from $146.4 million, or 33 cents per share, a year earlier.
Excluding a restructuring charge and other items, earnings were 29 cents per share.
Analysts polled by FactSet expected adjusted earnings of 31 cents per share.
ConAgra had warned investors in June that its first-quarter earnings may fall below last year's numbers, given what CEO Gary Rodkin calls a “challenging” market.
Revenue rose 10 percent to $3.07 billion from $2.8 billion, surpassing Wall Street's estimate of $2.94 billion.
The consumer foods unit, which made up 62 percent of the quarter's revenue, reported a 4 percent sales increase thanks in part to higher prices. ConAgra said it will make additional price increases in the second quarter. Some of its best performing brands included Peter Pan, Reddi-wip, Slim Jim, Swiss Miss and Wesson.
At the commercial foods division, which includes seasonings, flavors and other goods sold to foodservice and commercial businesses, revenue climbed 19 percent on higher flour prices and price increases at Lamb Weston.
The shift from an old wheat crop to a new wheat crop hurt the unit's profit, which dropped 14 percent.
The commercial foods segment comprised 38 percent of first-quarter sales.
Looking ahead, ConAgra still expects a low- to mid-single-digit rate increase in fiscal 2012 adjusted earnings. The company earned $1.75 per share a year ago.
Wall Street forecasts full-year earnings of $1.81 per share.
The food maker now predicts full-year inflation expectations of 9 percent to 10 percent compared with a previous forecast of 7 percent to 8 percent.
For the second quarter, ConAgra anticipates earnings will come in below the prior-year period's 45 cents per share due to higher costs and increased marketing investments.
Analysts predict earnings of 45 cents per share for the quarter.
ConAgra withdrew its $5.17 billion takeover bid for cereal and food maker Ralcorp Holdings Inc. on Monday. Ralcorp, which makes private-label food and Post cereal, has rejected several bids from ConAgra since March, including its latest $94 per share bid last month.
ConAgra gave Ralcorp a Monday deadline to start discussions or it would walk away. Ralcorp rejected the offer for a second time on Monday and ConAgra withdrew its bid.