Quarterly Earnings

Conagra expects more ‘value-enhancing’ acquisitions after delivering Q1 2018 results

By Douglas Yu

- Last updated on GMT

Conagra expects more acquisitions after delivering Q1 2018 results

Related tags Popcorn

Conagra’s CEO and president, Sean Connolly, said the company started well in the first quarter of fiscal 2018 and will continue its intensified acquisition strategy to acquire both small premium brands and large companies.

Connolly reported the company’s adjusted EPS for the quarter exceeded expectations and was up nearly 18% from the prior year.

Conagra’s Q1 net sales were down 4.8%, and organic net sales were down 3%, mainly driven by volume declines in its grocery and snacks, international and foodservice sectors.

However, the results were partially offset by volume increases in the refrigerated and frozen segment due to new product introductions.

Premium snack acquisitions contribute growth

David Marberger, Conagra’s executive VP and CFO, said: “The acquisitions of Frontera, Duke’s and BIGS added 3.6 percentage points to the reported net sales growth rate.”

Total organic net sales of the grocery and snacks segment, however, were down 5.1%, driven by a volume decline of 5.9%, said Marberger.

Conagra recently acquired Angie’s popcorn brand Boomchickapop​ for $250m to refresh its popcorn portfolio.

“Angie’s [popcorn] is on track to generate approximately $100m in sales by the end of calendar year 2017 [the expected transaction closing date],”​ said Connolly.

He noted Conagra would acquire both small premium brands and large companies in the future as long as they can be accretive to company sales.

“We'll stay active in our pursuit of value-enhancing M&A, and we will be relentless about doing what's necessary to deliver our long-term algorithm,”​ said Connolly.

Grocery and snacks segment

Conagra’s overall grocery and snacks segment reported a 1.5% sales decline during Q1, despite growth contributions from its recent acquisitions.

According to Marberger, the segment discontinued low-performing SKUs by not repeating discount merchandizing events on a handful of center-store brands.

As a result, the company reported the segment’s declining sales “abated materially”​ as the quarter progressed, and momentum is expected to continue in the second quarter.

Conversely, Conagra’s refrigerated and frozen segment posted a 1.3% sales increase due to strong growth among brands such as Marie Callender’s and Healthy Choice, as well as productivity gain in its supply chain.

Regarding its snack business, Connolly said Conagra manages its total portfolio as a single cohort.

“There are growth pockets in our snacks business… there are also plenty of reliable contributors in that grocery business that are very high margin, high cash flow,” ​he said. “We have not renovated [or] modernized them yet… We’ll do that.”

Conagra anticipated its organic net sales to drop by 2% to flat in fiscal 2018. 

Related topics Manufacturers Health Diversification

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