Efficiency gains drive TreeHouse earnings

by Keith Nunes
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Sam Reed, TreeHouse Foods
Sam K. Reed, chairman, president and c.e.o. of TreeHouse said third quarter earnings rose as the company improved its internal operations.

OAK BROOK, ILL. — A focus on margin expansion supported by efficiency initiatives helped TreeHouse Foods report positive earnings for the third quarter of fiscal 2015, ended Sept. 30.

For the quarter, the company earned $28,441,000, equal to 66c per share on the common stock, and an increase compared with the same period of the previous year when quarterly earnings were $19,882,000, or 48c per share.

Revenues for the quarter of $798,638,000 were relatively steady compared with the previous year when quarterly sales totaled $795,726,000.

“Third-quarter volume/mix declined 4.3% on an organic basis, driven by lower volumes in most categories,” said Sam K. Reed, chairman, president and chief executive officer. “Once again, we faced a difficult comparison to 2014 when we posted organic volume/mix growth in last year's third quarter of approximately 4%.

“We continue to be encouraged by the margin progression we are seeing in our legacy product categories.  Excluding coffee, we delivered year-over-year margin expansion of 70 basis points, as we carry out our internal efficiency initiatives and maintain focus on our cost structure.”

In a conference call with securities analysts on Nov. 5, Mr. Reed added that he sees TreeHouse gaining strength in the midst of a weak retail market.

“… Although we posted only fractional percentage growth in revenues this quarter our operating units are making progress in giant strides,” he said. “We have gained market share in 9 of 12 major product categories led by pickles, baking nuts and mac and cheese. Our center-of-store staples, excluding coffee and snacks, continue to rally with third-quarter profit growth of 220 basis points on a constant currency basis.”

Generic single-serve coffee pods
The market for single-serve coffee remains challenging for TreeHouse Foods.

The market for single-serve coffee remains challenging for TreeHouse Foods. Lower category pricing continues to impact results and Dennis Riordan, chief financial officer, said he expects the impact to continue until the company laps the issues in early 2016.

But Mr. Reed is optimistic about the category, because as the prices of single-serve coffee brewers continue to come down it will allow new consumers to enter the market.

“I think that’s an indication that there is a segment of rapidly growing economy-minded consumers,” Mr. Reed said. “And my belief is, and as we stated over the last several of these calls, that those consumers will be new to the category and broaden the base. And that is always a good proposition for private label.”

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