OAK BROOK, ILL. – TreeHouse Foods, Inc. is struggling to balance growth with supply chain disruptions that are affecting its production and service capabilities. Approximately half of the company’s 29 product categories are on allocation and the issues affecting some of those categories are expected to continue into fiscal 2022, said William J. Kelley, chief financial officer.
“We anticipate that we’ll see demand for private label continue to strengthen, giving us confidence that we have the opportunity to gain share,” Mr. Kelley said during a Feb. 14 conference call with analysts. “We also expect that labor and supply chain will remain difficult through at least the first half of the year. This will continue to pressure our service levels and our ability to meet all of the demand.”
The issue is most pressing with new business. The company does not want to commit to new customers that it may not be able to service and meet expectations.
“The key for us this year would be putting the right resources in place so that we can fulfill it and fulfill those new businesses,” said Steven T. Oakland, president and chief executive officer. “We’re really cautious right now not to disappoint the customer.”
Mr. Oakland added that the challenges TreeHouse Foods is facing range from product availability to scheduling issues that cause product to not be delivered on time.
“The result is production scheduling difficulties, downtime and inefficiency,” he said. “These labor and supply chain issues are dictating not only how much we can produce, but how efficiently we can produce it.”
The challenges and disruptions showed up in the private label manufacturer’s fiscal 2021 results. For the year ended Dec. 31 the company recorded a loss of $12.5 million, a decline when compared with fiscal 2020 when the company earned $13.8 million, equal to 87¢ per share.
Annual sales were essentially flat at $4.33 billion in fiscal 2021 compared to $4.35 billion in fiscal 2020.
TreeHouse Foods’ Meal Preparation business unit saw sales rise slightly during the year to $2.73 billion, up from $2.7 billion the year before. Snacking & Beverages unit sales fell to $1.59 billion from $1.65 billion the previous year. The company attributed the decline in Snacking & Beverage sales to volume/mix.
In fiscal 2022, TreeHouse management is guiding adjusted earnings to be between $385 million to $415 million, up approximately 5% year-over-year at the midpoint of the range, and for net sales growth of at least 11% year over year.
“In terms of pricing, we continue to do an excellent job working collaboratively with our customers as we do all we can to serve consumers,” Mr. Kelley said. “Those pricing efforts will drive top-line growth in the low double digits as we start the year. We have taken additional pricing that was largely communicated and will be effective at the end of March. We expect pricing to build as the year goes on.
“In terms of our view on volume, the impact of labor and supply chain disruption is expected to put continued pressure on service levels through at least the first half of the year. Because of this, we anticipate that volumes will continue to be down most likely muting the impact of pricing early in the year. Our labor, supply chain and operations initiatives are expected to release some of the pressure in the back half, and we anticipate a gradual improvement in both service levels and volumes.”In November, TreeHouse Foods’ board of directors said it was undertaking a strategic review that may lead to the sale of all or a part of the company. During the conference call Mr. Oakland said the strategic review is ongoing and that the company did not have any additional information to share.