ConAgra squeezed by higher food costs, but beats expectations

By Caroline Scott-Thomas

- Last updated on GMT

ConAgra squeezed by higher food costs, but beats expectations
Food manufacturer ConAgra Foods has reported a 14% drop in its second-quarter profits, under pressure from higher food commodity costs, despite increased sales.

The company reported net profits of $171.8m, compared to $200.9m for the same period last year, while net sales were up 8% to $3.4bn from $3.15bn in the second quarter of fiscal 2011.

ConAgra CEO Gary Rodkin said: “The marketplace environment remains difficult due to continuing inflationary pressures and the impact of the current economy on consumers, so we are cautious about business conditions.”

However, many food companies are in a similar boat, and ConAgra’s results beat analysts’ expectations. Those surveyed by Thomson Reuters had expected the company to report an average income of $0.43 per share, but it reported $0.47 per share, excluding one-off items. Analysts had expected sales to be lower too, at around $3.34bn.

“The quarter’s higher-than-planned comparable [earnings per share] reflects strong double-digit operating profit growth for our Commercial Foods segment, which has successfully overcome difficult operating conditions and implemented pricing,”​ Rodkin said.

“We are encouraged by our progress in fighting inflation in the Consumer Foods segment; volumes for that segment have performed largely as expected given ongoing price increases.”

The company’s Commercial Foods segment covers ingredients such as specialty potato products, seasonings, flavors, blends and milled grain products, while Consumer Foods covers branded and private label finished products sold at retail and in foodservice. Commercial Foods accounted for 37% of the company’s sales for the year to date, and Consumer Foods for the remaining 63%.

ConAgra also reiterated its full-year 2012 guidance, with earnings growth per share expected to be in the low- to mid-single-digit range over the previous year, it said, with second-half earnings growth expected to be concentrated in the fourth quarter, boosted by acquisitions and higher pricing.

The company’s share price rose 4.5% on Tuesday morning, reaching $26.30 by 11am ET.

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