Kelsen acquisition boosts Campbell baking unit performance

by Eric Schroeder
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CAMDEN, N.J. — The August 2013 acquisition of Kelsen Group A/S, a Danish producer of baked snacks, continued to pay dividends for Campbell Soup Co. in the second quarter of fiscal 2014. Operating earnings within the Global Baking and Snacking division of the Campbell Soup Co. totaled $88 million in the second quarter ended Jan. 26, up 19% from $74 million in the same period a year ago.

Campbell said the increase primarily was driven by higher selling prices, productivity improvements and the acquisition of Kelsen Group, partially offset by cost inflation and higher promotional spending.

Sales rose 14% to $639 million, which compared with $561 million in the second quarter of fiscal 2013. Sales benefited from the acquisition of Kelsen Group, which contributed $92 million, or 16 percentage points, during the quarter. Price and sales allowances added 3 points, and volume and mix added 1 point. Promotional spending subtracted 2 points, and currency subtracted 4 points.

“Sales of Pepperidge Farm products increased, driven by higher selling prices and volume gains, partially offset by increased promotional spending,” Campbell said. “Sales of fresh bakery products increased versus the prior year, driven by volume gains in bread and stuffing.

“In cookies and crackers, sales increases were driven by gains in Goldfish snack crackers and Pepperidge Farm cookies, partly offset by declines in adult cracker varieties.

“Sales at Arnott’s decreased primarily due to the negative impact of currency and sales declines in Australia, which were partially offset by strong gains in Indonesia.”

Overall, Denise Morrison, president and chief executive officer, said Campbell made progress on both strengthening its core business and expanding into higher growth spaces during the second quarter after a slow start to the year.

“While I am encouraged by our second-quarter results, our team recognizes that our full-year guidance demands that we continue to deliver improved performance in the second half,” Ms. Morrison said. “We expect our U.S. Soup business to benefit from eight new soups that were launched last month, including our first Latin-inspired cooking soups. We anticipate a stronger second half from Pepperidge Farm, particularly in the Goldfish franchise. We expect continued strong performance from Bolthouse Farms, which will launch an exciting suite of innovative new beverages and salad dressings this spring. We expect a more meaningful contribution from Plum Organics as the products impacted by the voluntary recall in November return to shelf. We also plan to improve profitability as we continue to focus on reducing costs and driving efficiency in our supply chain. We remain focused on executing against our aggressive but realistic plans to drive growth in the back half and deliver our full-year guidance.”

Net income in the second quarter at Campbell Soup was $325 million, equal to $1.03 per share on the common stock, up 71% from $190 million, or 60c per share, in the same period a year ago. Net sales for the second quarter were $2,281 million, up 6% from $2,162 million.

For the first half of fiscal 2014, income increased 14% to $497 million, or $1.57 per share, from $435 million, or $1.38 per share. Net sales rose 2% to $4,446 million from $4,367 million.
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