B&G Foods wants to return to being a “Steady Eddie”, the US manufacturer’s CEO has said, after the Green Giant posted another year of falling earnings.
Ken Romanzi, B&G’s president and CEO, said yesterday (25 February) the company wanted to “provide some stability to our earnings going forward”.
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In 2019, B&G generated net income of US$76.4m, down from $172.4m a year earlier. The company’s operating income stood at $203.8m, versus $340.2m in 2018.
B&G’s profits in 2018 were boosted by a $176m gain on the sale of assets but the business also saw its net income and EBITDA fall on an adjusted basis.
Romanzi, the former Frito-Lay and Cadbury Schweppes executive, became B&G’s chief executive in April and said the company had, in the fourth quarter of 2019, “delivered stable expected performance” with net sales and adjusted EBITDA rising year-on-year. He said that, even though B&G’s adjusted EBITDA for the year as a whole declined, the result came in at the “mid-point” of the company’s guidance.
“So all in all, we delivered stable expected performance. I view this as very important because after many years of industry-leading performance, our earnings stumbled in 2017 and 2018 with fourth quarter earnings surprises even while growing sales. So delivering what was expected in 2019 was critical for our new leadership team. Our plan in 2019 was to deliver modest sales growth and cover inflationary input costs with pricing and cost savings initiatives. And that’s exactly what we did,” Romanzi told analysts on a conference call to discuss B&G’s financial results.
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By GlobalDataLast week, B&G announced the acquisition of local vegan product manufacturer Farmwise Foods. In May last year, the company also purchased US bakery ingredients manufacturer Clabber Girl Corp.
Romanzi said some investors had expressed concern about B&G’s leverage and whether it would hinder the company in making further acquisitions. “We do not believe we’re shut out of acquiring more businesses,” Romanzi insisted. “The M&A pipeline is active, and we believe opportunities remain to acquire businesses without increasing leverage and that, in some cases, may actually help reduce leverage.
“Our model is really to provide some stability to our earnings going forward. We’re not going to be presenting huge increases in base-business earnings. It’s really to get back on-track to being kind of the Steady Eddie performance that B&G has always been known for and then get back to accretive acquisitions. The problem over the last few years before ’19 was that while we continued on the acquisition hunt we had leakage. The acquisitions weren’t accretive – not because the acquisition didn’t perform, but because we had a leaky bucket. So, our goal is to stop the leaky bucket, which we did last year and Clabber Girl helped us grow a little bit.”
The B&G chief added: “And so, going forward, we’re saying we’re going to have stability in top line and bottom line. We need to do cost productivity to offset inflation and maybe drop some of that to the bottom line, maybe invest some in marketing but then make sure that our balance sheet can be prepared to do the accretive acquisitions. That’s a little tricky with our debt the way it is right now, quite frankly, but not impossible.”
B&G’s most recent acquisition of Farmwise Foods gives the company brands including Farmwise and Veggie Fries. Romanzi said the new assets could help B&G develop and launch more products to be sold under its largest, existing brand Green Giant.
“Farmwise is a small but very prolific, forward-thinking frozen veggie brand that will allow us to quickly commercialise products from their innovation pipeline and introduce them under the Green Giant brand in the traditional food channel and under the Farmwise name in the natural channel where the Green Giant brand isn’t a good fit,” Romanzi explained. “We are very excited about this small acquisition with quick scale-up capability.”
B&G’s shares were up 19.17% today at the time of writing, hitting $15.23 at 17:52 ET.
