Shares in Campbell Soup Co. rose in early trading today (5 June) after the US manufacturer said its third-quarter results came in ahead of its expectations and the company increased its forecast for annual earnings.
The Campbell’s soup and Lance crackers owner released a detailed set of numbers that comprised figures for continuing operations and “combined” results that included data from its fresh-foods division, which it is selling and was classified as “discontinued operations”.
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In the three months to 28 April, Campbell’s continuing operations saw its net sales rise 16% on a reported basis to US$2.18bn, boosted by the impact of last year’s acquisition of US snacks supplier Snyder’s-Lance.
On an organic basis, net sales were “comparable” with the third quarter of Campbell’s previous financial year, with the company saying “gains” at its global biscuits and snacks division were offset by “declines” from its meals and beverages business.
Campbell’s reported third-quarter EBIT from continuing operations jumped 68% to $266m but, on an adjusted basis, fell 2% to $316m amid the lower sales from the company’s base business, declines that weighed on gross margins.
On a reported basis, Campbell booked third-quarter net earnings of $84m, a swing from a loss of $393m in last year’s third quarter – a set of numbers announced alongside the departure of then CEO Denise Morrison.
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By GlobalDataMark Clouse, the former Pinnacle Foods and Mondelez International executive named Campbell CEO in January, said: “Our results this quarter were ahead of our expectations, making it the third consecutive quarter that we met or exceeded our outlook. I am also pleased to see profitability trends are improving, driven by sequential gross margin improvement.
“In the quarter, we continued to drive sales growth in global biscuits and snacks, fuelled by our US snacks portfolio. The business continues its growth trends on Pepperidge Farm, coupled with improvements in the Snyder’s-Lance portfolio. In the meals and beverages segment, although there is more to do, we are making steady improvements on gross margin and profit and this business is showing signs of stabilisation.”
Campbell pointed to its “improved earnings outlook for fiscal 2019” and the impact of the sale of its fresh-food assets for an uptick in its guidance for annual, adjusted earnings per share. The company now sees adjusted EPS being between $2.50 and $2.55 for the year as a whole, versus an earlier estimate of $2.45 to $2.53.
Nine-month net sales from Campbell’s continuing operations increased 24% to $7.13bn. On an organic basis, however, they were down 1%.
Reported EBIT rose 12% to $1.01bn. On an adjusted basis, EBIT dipped 1% to $1.13bn.
Nine-month net earnings were $219m, versus $167m a year earlier.
In pre-market trading today, Campbell’s shares rose 3.65% at $38.11.
Campbell’s asset disposals, set in train after a review of the business last autumn, are not yet complete. Campbell is looking to sell international snacks assets including Arnott’s biscuits brand and the Denmark-based baked snacks business Kelsen Group. Mondelez has been named in reports as an interested party and in April was said to have tabled an offer below Campbell’s expectations.
Meanwhile, Campbell was last month also reported to be weighing up whether to sell its Kettle Chips unit, acquired through the purchase of Snyder’s-Lance in 2017. A spokesperson for Campbell said at the time: “We don’t comment on rumour or speculation.”
