ConAgra net profit down; Slim Jims back soon

ConAgra Foods Inc. on Thursday (June 25) reported a fall of its net profit by 13 percent in the fourth quarter, but earnings excluding special items met Wall Street expectations as commodity price inflation eased.

 

The company's brands Healthy Choice, Marie Callender's and Banquet projected commodity inflation in the low single digits in its fiscal year 2010 that began this month, driven by higher costs for tomatoes, the tin used in cans and some proteins.

 

ConAgra however foresee that the explosion at its Garner, N.C., Slim Jim plant earlier this month that killed three employees and injured dozens would have no long-term material impact on the brand.

 

ConAgra Chief Executive Gary Rodkin said on a conference call for investors said the company will be able to replace basic operating performance of Slim Jim with insurance, hence, no hole for their fiscal 2010 earnings.

 

Slim Jim shipments could see interruptions in the first quarter but are expected to achieve "acceptable service levels" in the second quarter as the company re-established production capacity, it said. ConAgra said it has relied on existing inventories of Slim Jims to service customer needs since the explosion.

 

ConAgra said the accident was caused by a natural gas explosion that occurred while a contractor was installing new equipment in the plant.

 

The company said it has spent US$275 million on food safety, quality and infrastructure improvements over the past two years.

 

ConAgra posted net income of US$174.7 million, or 39 cents a share, in its fiscal fourth quarter ended May 31, down from US$201.3 million, or 41 cents a share, a year earlier.

 

Profit excluding special items was in line with the average analyst estimate of 41 cents a share, according to Thomson Reuters.

 

The company said cost savings initiatives offset the negative effects of commodity inflation, which is finally reaching more manageable levels.

 

Fourth-quarter sales rose 7.5 percent to US$3.3 billion, boosted by strong growth in the company's Consumer Foods business. Sales in the Consumer Foods unit rose 14 percent, boosted by new products, improved marketing, a focus on value pricing and an extra selling week in the latest quarter.

 

ConAgra said it expects earnings from continuing operations of US$1.63 to US$1.66 a share in fiscal 2010. Analysts on average were expecting $1.63 a share, according to Reuters estimates.

 

Rodkin said Con-Agra's growth should be primarily driven by the Consumer Foods segment of the business.