TreeHouse off to solid start behind record first-quarter earnings
WESTCHESTER, ILL. — Acquisitions and pricing boosted sales and led earnings higher at TreeHouse Foods, Inc. in the first quarter of fiscal 2013. Net income in the quarter ended March 31 was $22,974,000, equal to 63c per share on the common stock, up 4% from $22,074,000, or 61c per share, in the same period a year ago. The most recent quarterly results included two unusual items: a 14c per share expense related to the restructuring of the company’s soup operations and the Seaforth, Ont., salad dressing plant closing, and a 2c per share gain on the mark-to-market adjustment of the company’s commodity agreements.
Net sales in the first quarter of fiscal 2013 were $540,110,000, up 3% from $523,811,000 a year ago.
“We are pleased to start 2013 with the best first-quarter earnings in our history, having delivered top-line growth and gross margin improvement, excluding restructuring charges,” said Sam K. Reed, chairman, president and chief executive officer. “Our North American Retail Grocery volume/mix increased nicely, up 2.8%, excluding the impact related to the previously-announced soup restructuring. In addition, all three of our reporting segments delivered direct operating income growth compared to last year.”
The North American Retail Grocery segment had direct operating income of $65,588,000 in the first quarter of fiscal 2013, up 6% from $61,605,000 a year ago. Sales increased 2% to $386,081,000 from $379,041,000.
In a May 9 conference call to discuss first-quarter results, Dennis Riordan, executive vice-president and chief financial officer, said the sales gain was led by a 29% increase in the powdered drinks category, which includes single-serve coffee products.
“The new coffee business has been a huge success for us, and we are continuing to meet the demands from our customers,” he said. “The increase in coffee products more than offset lower sales of single-serve drink sticks as the beverage enhancer category has shifted toward liquid rather than powdered enhancers. In response to the shift, we will be shipping our first national brand equivalent of liquid enhancers this month.”
In finally shipping the liquid enhancers this month, Mr. Riordan acknowledged that while TreeHouse aims to “hit it out of the park every time,” it “did not do it on this one.”
“We were definitely late to the game on the liquid beverage enhancers, and we pretty much missed last season, which opened the door to some other private label manufacturers, and now we have a product that is actually launching this month and will be at some accounts,” he said. “So we are definitely playing catch-up on this one, but we are really happy with our products, and we are going to have to kind of bootstrap this one back up.”
The Food Away From Home segment had direct operating income of $10,982,000, up 12% from $9,797,000, while sales in the segment rose 9% to $81,813,000 from $75,349,000.
With regard to the full year outlook, Mr. Reed said, “We believe recent patterns in consumer food purchasing confirm our original thoughts that 2013 will be a year of modest industry volume growth, compared to the negative results of the last two years. However, it is early in the year, and we continue to be prepared for the challenges of delivering food volume growth in an ongoing choppy economic climate. While we are likely to see similar ebbs and flows in consumer buying habits, we finished the first quarter in line with our full year plan, and therefore we are maintaining our original guidance of 2013 adjusted earnings per share of $3 to $3.10.
“In regard to the M&A market, we are as committed as ever to our private label strategy and are confident that we will add quality additions to the TreeHouse portfolio of products in 2013. While the ultimate timing of any acquisition activity is very difficult to predict, the conditions that make for a strong M&A market — sellers and available financing — remain as strong as we have seen in quite some time.”