WESTERVILLE, OHIO — Lancaster Colony Corp. announced it has executed the first wave of its previously delayed ERP initiative, Project Ascent.
“I'm happy to share that the cutover went very well and in line with our expectations,” David A. Ciesinski, president and chief executive officer of Lancaster, said during an Aug. 25 conference call with analysts to discuss fiscal 2022 results. “Customer fulfillment levels remain strong before and after the system cutover with no unplanned disruptions in receiving orders, producing products, shipping orders or receiving payments.”
In the fourth quarter ended June 30, Lancaster net income totaled $29.04 million, equal to $1.06 per share on the common stock, down 8% from $31.73 million, or $1.15 per share, in the same period a year ago. Net sales were $452.41 million, up 15% from $385.57 million a year ago.
Overall, results for the fourth quarter reflected strong top-line growth and improvements in gross margin performance, Thomas Pigott, vice president, assistance secretary and chief financial officer, said during the call.
“Our successfully implemented pricing actions have begun to offset the unprecedented levels of inflation impacting our business,” Mr. Pigott said. “The growth was driven by pricing actions taken in both segments and the customer pull forward of shipments in advance of our ERP go-live.
“Customers increased their orders for deliveries near the end of the quarter to ensure they had adequate inventory prior to our SAP implementation on July 1. We estimate these shipments contributed $25 million in incremental sales to the fourth-quarter results.”
Mr. Pigott said the company estimated gross profit benefited from an incremental $5 million due to those advanced sales.
“These items were offset by the unprecedented inflation and increased supply chain costs,” he said. “Inflation for commodities and packaging materials was up nearly 30%. The majority of the commodities we utilized were priced at or near 10-year highs. Our significant exposure to soybean oil, which was up notably, drove our inflationary impact higher than many of our peers.”
Net income at Lancaster in the year ended June 30 was $89.59 million, or $3.26 per share, down 37% from $142.33 million, or $5.17 per share, in fiscal 2021. Net sales rose 14% to $1.68 billion from $1.47 billion in the same period a year ago.
Operating income for the Retail unit in the full year eased to $151.6 million, a drop of 20% from $188.4 million in fiscal 2021. In the fourth quarter, operating income for Retail was $31.63 million, down 28% from $43.85 million in the year-ago quarter. Net sales in the unit rose 10% in the full year to $915.21 million from $828.96 million and increased 8% in the fourth quarter to $233.11 million from $214.31 million.
Mr. Ciesinski said results for the Retail segment in the fourth quarter were driven by pricing actions, advanced ordering ahead of the July 1 ERP go-live and sales volume gains on New York Bakery, Sister Schubert’s and Olive Garden dressings.
Operating income in the company’s Foodservice unit in the full year dipped 7% to $82.75 million from $89.05 million in the same period a year ago. In the fourth quarter, operating income rose 35% to $30.06 million from $22.2 million. Net sales in the unit rose 19% in the full year to $761.18 from $638.1 million, while fourth-quarter sales increased 28% to $219.31 million from $171.26 million.
Foodservice sales volumes measured in pounds increased 2% in the quarter, which compared with the exceptional growth of 29% in last year's fourth quarter, Mr. Ciesinski said.“During Q4, we continued to experience high levels of inflation for raw materials, packaging and freight,” Mr. Ciesinski added. “That said, we were encouraged by our progress of improving our PNOC, pricing net of commodities, this progress is reflected in our Q4 gross margin, which showed sequential improvement of 480 basis points versus our fiscal third quarter. We also acknowledge there’s more work to be done. We remain focused upon improving our financial performance through productivity gains in our supply chain and revenue growth management.”