Campbell baking and snacking earnings climb in year

by Eric Schroeder
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Campbell was pleased with the share in consumption of Goldfish crackers and Milano cookies.

CAMDEN, N.J. — The Global Baking and Snacking segment of the Campbell Soup Co. performed well during fiscal 2015, Denise Morrison, president and chief executive officer, told analysts during a Sept. 3 conference call. Operating earnings in the segment increased 5% to $350 million for the year ended Aug. 2, and sales declined 3% to $2,375 million.

“I feel particularly good about the improvement in Australian biscuits as the team made significant progress in this important core business,” Ms. Morrison said. “In Southeast Asia, our Indonesia business delivered another year of double-digit growth, but sales declined in the fourth quarter as a result of worsening economic conditions in this market, which we expect to persist.”

Looking at the company’s core business in the United States and Australia, Ms. Morrison said Campbell was pleased with the share in consumption of Goldfish crackers and in particular Milano, although the company did experience some softness in cookies during the fourth quarter.

Denise Morrison, president c.e.o. of Campbell.

“That was pretty much as expected because in the biscuit business in the United States, particularly in the quarter, we did not promote as heavily as last year, because the promotions were not as productive as we would have expected,” she said. “So that was pretty deliberate. But we expect moderate growth in the United States on our biscuit business.

“In the Australian business we’re really happy with the year that we had there. That has been a pretty remarkable turnaround. We were challenged in Australia for a couple of years, and they have now posted really outstanding results. It’s been really on the fundamentals, better advertising, more innovation, more brand building, more digital. So we believe that the building blocks they’ve put in place there are very sustainable.”

Ms. Morrison said Campbell also had a great year in Indonesia with double-digit growth, despite a slow fourth quarter.

“All you have to do is pick up a newspaper to see what’s going on in Asia these days,” she said. “But we’re watching that very carefully, and we believe we have a lot of runway in Indonesia to expand our distribution points, but we’re going to be very responsible about that business in 2016.

“And then the Kelsen business, this is a very small quarter for Kelsen. The sales are skewed in China largely toward Chinese New Year, but that said, we did have some inventory overhang from Chinese New Year this year, and we’re working through that right now. That hit us predominantly in the fourth quarter.”

For the year ended Aug. 2, Campbell had net earnings of $691 million, equal to $2.21 on the common stock, down 14% from $807 million, or $2.35 per share, for the previous year. During the year, the company incurred restructuring charges and implementation costs associated with a new organization structure and cost reduction efforts.

Campbell's c.e.o. said this was a very small quarter for Kelsen.

Net sales were $8,082 million, down 2.2% from $8,268 million. The decline reflected the negative impact of foreign currency translation and one fewer selling week compared to the previous year. Campbell posted organic sales growth of 1%, driven by gains in four of the company’s five segments.

Looking ahead to the coming year, Ms. Morrison said the company plans to focus on driving growth, aggressively reducing costs and reinvesting a portion of the savings in areas of the business with the greatest growth potential. Campbell expects sales will be flat to 1% higher over sales in fiscal 2015, adjusted EBIT to grow 3% to 5% and adjusted earnings per share to increase 3% to 5%, or $2.53 to $2.58 per share. The guidance includes the impact of foreign currency translation, as well as the impact of the Garden Fresh Gourmet acquisition.

“I’m cautious but optimistic about fiscal 2016,” Ms. Morrison said. “I believe that the strategic imperatives we’re pursuing, purpose and transparency in our core business, digital marketing and e-commerce, health and wellbeing and expansion in developing markets, coupled with our divisions’ clear portfolio roles, position us well for the year ahead.

“We’re very clear about our challenges, particularly driving sustainable sales growth, but we're now better organized and better prepared to meet those challenges head on.”
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