Conagra Brands, home to food products including Banquet ready meals and Duncan Hines baking mixes, has issued new forecasts for key sales and margin metrics amid inflationary pressure.
The US manufacturer believes its net sales, on an organic basis, will be “approximately flat” in its new financial year, compared to the previous 12 months.
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Conagra, which announced its fourth-quarter and annual financial results today (13 July), is also forecasting an adjusted operating margin of around 16% and adjusted earnings per share of approximately US$2.50.
In April, when Conagra reported its third-quarter numbers, the Hunt’s canned tomatoes owner forecast a 1-2% rise in its organic net sales in its 2021/22 financial year, adjusted operating margin of 18-19% and adjusted EPS of $2.63-2.73.
“The company is revising its fiscal 2022 guidance to reflect increased inflation since the fiscal third quarter. This impact will be particularly felt in the first half of fiscal 2022, as remediation measures – including pricing – lag the timing of realised cost inflation,” Conagra said in a statement.
In the financial year to 30 May, Conagra’s net sales rose 1.2% to $11.18bn, dampened by the impact of business disposals and the company lapping an extra selling week the year before. The increase equated to a 5.1% rise on an organic basis.
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By GlobalDataConagra’s annual net income was $1.3bn, up 54.5% on a year earlier, helped in part by tax benefits associated with a restructuring of the company’s Ardent Mills joint venture investment.
In the fourth quarter, Conagra’s sales fell as the company cycled the stockpiling the industry saw between March and May in the early months of the Covid-19 pandemic.
On a reported basis, net sales dropped 16.7% to $2.7bn. Organically, net sales were down 10.1%, with volumes 12.8% lower.
In the quarter, net income attributable to Conagra increased 53.6% to $310m. Adjusted net income decreased 29.1% to $261m, driven primarily by a fall in gross profit.
Conagra president and CEO Sean Connolly described the results as “strong” but added: “As the fourth quarter unfolded, input cost inflation accelerated and we now expect fiscal 2022 input cost inflation to be materially higher than we anticipated at the end of fiscal Q3. In response, we have further enhanced the aggressive and comprehensive action plan already being executed, which includes broad-based pricing. While we are pleased with the initial results, there will be a lag between the time we are hit with higher costs and when we realise the benefits of our actions.”
Shares in Conagra were down 4.34% at $34.37 at 12:26 local time.
