Charges crimp TreeHouse full-year profit
by Eric Schroeder
WESTCHESTER, ILL. — Restructuring and facility closing charges related to certain soup and salad dressing operations weighed on full-year and fourth-quarter results at TreeHouse Foods, Inc.
Net income during the year ended Dec. 31, 2012, was $88,363,000, equal to $2.44 per share on the common stock, down 6% from $94,407,000, or $2.64 per share, in fiscal 2011. Fiscal 2012 results included 31c per share in restructuring/facility consolidation costs, which compared with 15c per share in such costs during fiscal 2011. Sales for the year were $2,182,125,000, up 6% from $2,049,985,000 during the previous year.
For the fourth quarter, net income fell 16% to $25,224,000, or 70c per share, which compared with $29,864,000, or 83c per share, in the same period a year ago. The most recent quarterly results included an 18c per share charge related to the company’s previously announced restructuring of its soup operations and the closing of the salad dressing plant in Seaforth, Ont. Net sales in the fourth quarter were $592,781,000, up 11% from $535,802,000.
“We had a solid finish to the year and are encouraged by the fourth-quarter revenue growth across nearly all of our categories,” said Sam K. Reed, chairman, president and chief executive officer. “Despite continued sluggish performance in the U.S. grocery industry, we are very pleased with the 8.7% growth in volume/mix in our North American Retail Grocery segment. Last year’s challenges in the retail grocery landscape and the input cost environment finally appear to be moderating, and we are carrying forward the momentum that we gained at the end of the year.”
The North American Retail Grocery segment had direct operating income of $244,736,000 in fiscal 2012, up narrowly from $243,744,000 a year ago. Sales for the year increased 8% to $1,568,014,000 from $1,456,213,000.
The Food Away From Home segment had direct operating income of $43,913,000, down from $44,808,000, while sales in the segment rose 10% to $338,357,000 from $307,819,000.
TreeHouse said the operating environment in 2012 turned out to be “significantly different” than its expectations at the beginning of the year, as consumer food purchases did not begin to rebound until very late in the year and drought conditions caused another year of turbulent input costs. The company initially had expected moderate growth and a benign input cost environment.
Looking ahead to 2013, TreeHouse said it expects to see relatively moderate volume growth across the majority of its categories, while single-serve hot beverages, sauces and salad dressings are expected to continue to grow at a faster pace relative to the company’s other categories. Net sales are expected to increase in the range of 3.5% to 4.5% while adjusted earnings per share are forecast to increase by 8% to 11% to $3 to $3.10 per share, the company said.
TreeHouse also said it expects it will be able to improve its gross margins by up to 100 basis points “through a combination of positive sales mix and internal efficiencies, resulting from recent restructuring cost-savings initiatives.”
“Although we delivered results below expectations in 2012, we finished the year with positive momentum and an improved focus on our day-to-day operating activities,” Mr. Reed said. “As we enter 2013, we believe we are better prepared despite challenges related to the economy, changing consumer shopping patterns or the weather. We are maintaining our internal focus on lowering our cost to serve but also escalating our efforts to find product adjacencies that will help drive incremental organic growth. Our new coffee program is a prime example of how we can turn our internal expertise into new avenues of growth.
“Externally, our deal team remains intently focused on assessing opportunities that meet our acquisition criteria. We believe the M&A market is beginning to thaw, and we expect interest rates to remain at very attractive levels throughout 2013. We believe that market conditions are strengthening, and we expect to be very active this year in evaluating prospects. As one of the few pure-play private label companies in our industry, we believe we are well positioned to take advantage of acquisition opportunities in 2013.”