PARSIPPANY, N.J. — What a difference a year has made for Pinnacle Foods, Inc. A year ago, the company reported weak second-quarter earnings as it worked to exit its Aunt Jemima frozen foods business following a food safety recall. With no such events taking place this year, the company reported earnings that appeared positive when compared to the same period of the previous year.
While the company’s results for the quarter ended July 1 were positive, inflationary pressures due to rising logistics costs took a toll.
For the quarter, Pinnacle Foods’ net income totaled $56,317,000, equal to 47c per share on the common stock, up sharply from $18,669,000, or 16c per share, in the same period a year ago.
Sales for the quarter fell slightly to $741,761,000, which compared with $744,608,000 during the second quarter of fiscal 2017.
“Our overall second-quarter result was consistent with our expectations despite an increasingly challenging operating environment,” said Mark Clouse, chief executive officer. “We delivered 140 b.p.s. of adjusted gross margin expansion in the quarter, even as inflation — particularly freight — remained a headwind for the entire industry. Looking forward, while we expect inflation will remain elevated, we remain confident in our ability to deliver our e.p.s. guidance for the year.”
In Pinnacle’s Frozen business unit, the company’s largest, sales for the quarter rose 4.3% to $308.5 million. Business unit earnings for the quarter rose to $50,327,000, which compared with $38,081,000 the year prior.
Sales growth in Frozen was driven by the Birds Eye business, specifically the Veggie Made platform that was launched in 2017. The company did report lower sales in frozen meals.
The company’s Grocery business unit saw sales and earnings fall during the quarter. Sales fell to $256,620,000 from $276,057,000 the year prior. Earnings fell to $52,131,000 from $61,870,000.
The company said the sales performance reflects unfavorable volume/mix of 6% and a 1.4% unfavorable impact from the phasing of Easter, only partially offset by favorable net price realization of 0.4%. Sales declines in the Duncan Hines baking business and Wish Bone salad dressings also affected results.
Sales rose in the Boulder business unit to $98,898,000 from $94,654,000 a year ago. Business earnings rose to $16,018,000 from $12,249,000 the year prior.
“The net sales performance for the Boulder segment reflected the continued strength of the Gardein business along with growth of Earth Balance,” the company said. “Partially offsetting this growth were lower net sales of the gluten-free portfolio.”
In the Specialty business, sales fell slightly to $77,730,000 from $78,004,000. The Specialty unit recorded earnings growth of $9,489,000 after recording a loss of $10,648,000 a year ago.
Pinnacle management reaffirmed the company’s guidance for 2018 in the range of $2.85 to $2.95 per share.
“At the guidance mid-point, this outlook represents growth of 16% versus the comparable 52-week adjusted diluted e.p.s. of $2.50 in 2017,” the company said.
On June 27, it was announced Pinnacle Foods had entered into an agreement to be acquired by Conagra Brands, Inc., Chicago, for approximately $11 billion. The transaction is expected to be completed by the end of the year.