Campbell Soup Co. (CPB) on Friday reported a 7 percent decline in profit for the second quarter as restructuring charges offset higher revenues that were aided by the company's acquisition of Bolthouse Farms.
Stripping out restructuring costs, Campbell's earnings per share beat analysts' expectations. Looking ahead, the company reiterated its financial outlook for fiscal year 2013.
The Camden, New Jersey-based maker of ready-to-serve soups, pastas and sauces, said that U.S. simple meals sales for the second quarter grew 1 percent from the year-ago period, while U.S. beverages sales declined 3 percent.
Global baking and snacking sales for the second quarter rose 7 percent and international simple meals edged up 1 percent from the prior-year quarter.
Bolthouse and Foodservices sales for the quarter doubled from the prior-year period to $352 million, with the acquisition of Bolthouse Farms contributing $195 million. Sales in North America Foodservice declined 10 percent from last year.
Campbell Soup's gross margin declined to 35.1 percent from 38.4 percent a year ago. Excluding items impacting comparability, adjusted gross margin for the current quarter was 36.8 percent. The decline in gross margin was primarily due to the company's acquisition of Bolthouse Farms, which operates with a lower gross margin structure.
In August 2012, Campbell Soup completed the acquisition of food and beverage company Bolthouse Farms from a fund managed by private equity firm Madison Dearborn Partners, LLC for $1.55 billion in cash.
Campbell Soup's second-quarter net earnings were $190 million or $0.60 per share, down from $205 million or $0.64 per share in the prior-year quarter.
Campbell said that on February 14, it entered into commercial arrangements with Grupo Jumex and Conservas La Costeña that will expand the company's access to manufacturing and distribution capabilities in Mexico. These providers will produce and distribute Campbell's beverages, soups, broths and sauces throughout the Mexican market.
As a result of these agreements, Campbell will close its plant in Villagrán, Mexico, and cut about 260 jobs. The company recorded a restructuring of $4 million after tax or $0.01 per share in the latest quarter related to this initiative.
Excluding restructuring charges, adjusted net earnings for the quarter were $220 million or $0.70 per share, compared with adjusted earnings of $207 million or $0.64 per share in the prior-year period. On average, analysts polled by Thomson Reuters expected earnings per share of $0.66 for the quarter. Analysts' estimates typically exclude one-time items.
Net sales for the quarter grew 10 percent to $2.33 billion from $2.11 billion in the year-ago period. Analysts had a consensus revenue estimate of $2.32 billion.
The acquisition of Bolthouse Farms added 9 percent to sales, while price and sales allowances added 2 percent and increased promotional spending subtracted 1 percent.
Looking ahead to fiscal 2013, Campbell Soup affirmed its outlook for adjusted earnings per share to increase 3 to 5 percent, to a range of $2.51 to $2.57 per share, on sales growth of 10 to 12 percent.
This guidance includes the estimated impact of the Bolthouse Farms business and excludes the impact of acquisition transaction costs and restructuring charges.
In fiscal 2013, Campbell expects Bolthouse Farms to contribute about $750 million to sales and add $0.05 to $0.07 to adjusted earnings per share, including the impact of the suspension of Campbell's strategic share repurchase program.
CPB closed Thursday's trading at $38.72. In Friday's pre-market, the stock is down $0.47 or 1.21 percent to $38.25.
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