Positive outlook for Diamond as nut sales surge

By Jane Byrne

- Last updated on GMT

Related tags Snack food

Strong snack growth has bolstered third quarter earnings at US nut manufacturer Diamond Foods, which acquired Kettle Foods at the end of March.

Revenue for the producer of cooking and snack nuts beat analysts estimates, rising 25 per cent to $138.7m, and the manufacturer said that it has raised its earnings outlook for the remainder of 2010 and 2011 due to this positive sales performance.

“As a result of the continued strength of our base business and our ability to solidify and sustain the trajectory of the Kettle business, we are raising our EPS guidance for fiscal 2011 by $0.10, to a range of $2.35 to $2.45 per share,”​ said Michael Mendes, Diamond chairman, president and CEO, during the conference call on its results.

The guidance, meanwhile, for the second half of fiscal year 2010 has been raised from $0.47 to $0.50 per share to $0.55 to $0.57 per share, said Mendes.

This implies fourth quarter earnings growth of between 30 to 40 per cent, continued the CEO.

Retail sales, according to a company statement, rose 39 per cent in the period, with greater scale in snacks, manufacturing efficiency initiatives and the elimination of low margin SKUs cited as having beneficial effect.

“We were prudent in managing culinary nut sales by selectively raising selling prices to offset commodity cost increases,”​ said Steven Neil, executive vice president and chief financial and administrative officer.

Neil noted commodity price pressure in tree nuts, corrugate and paper and he said the company has initiated price increases to maintain margins.

“We continue to monitor commodity pricing closely, especially in light of predictions from many industry experts that this fall’s California tree nut crops may set new all-time tonnage records, thereby increasing available supplies,”​ he added.

The company said that Kettle is performing quite well as retail sales are growing at three times the overall market growth rate in both the US and the UK.

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