Diamond ups guidance as Kettle buy pays dividends

Related tags Cent Organic growth

Nut and snack maker Diamond Foods has increased its outlook for fiscal year 2011 after volumes rose 40 per cent in Q1 following the acquisition of Kettle Foods.

For the full year 2011, Diamond now expects sales of between $920m and $945m, compared to its previous outlook of $910m to $940m.

Diamond has also upped its profit forecast. Management now expects net income to fall between 48 and 51 per cent rather than 45 and 50 per cent.

Kettle acquisition

This improved guidance comes on the back of significant organic sales growth and the initial success of the Kettle acquisition.

Diamond announced the purchase of Kettle in February, saying the deal would expand its footprint in the expanding potato chip segment and give the company platform for expansion in the UK and Europe. The premium brand did not disappoint in Q1, growing 11 per cent in the US and 10 per cent in the UK over the 12 weeks ending 30 October.

Other brands in the Diamond portfolio also performed well. Notable among them was snack nut brand Emerald, which reported growth of 32 per cent. Overall

“We are pleased with the organic growth in our base retail business, which has augmented by the addition of Kettle,”​ said CEO Michael Mendes.

“Our strong performance gives us the confidence to further invest in our brands while increasing our sales and earnings guidance.”

Advertising spend doubled

In the drive for increased top line growth Diamond has made significant investments in advertising, nearly doubling spending to $12.5m in Q1 compared to the equivalent period in the previous year.

Despite this increased spending, top line growth was sufficiently high to ensure that operating profit increased 7 per cent to $27.5m. This is on total sales for the quarter of $252.6m.

Moving forward, Diamond said that it plans to continue to invest in advertising, product development and the opening up of new channels such as convenience stores in the US.

Following the release of the Q1 financial results, shares in the company rose to their highest point this year.

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