An impressive performance in the Birds Eye frozen vegetable and ready meals segment and the acquisition of Boulder Brands helped grow Pinnacle Foods net sales by 17.8% during the fourth quarter of 2016, the Parsippany, New Jersey, USA-headquartered company has reported.
Net sales in Q4 increased 18.8% to $858.5 million, compared to $722.5 million in the year-ago period. Gross profit rose 20.1% to $267.6 million, or 31.2% of net sales, compared to gross profit of $222.8 million, or 30.8% in the fourth quarter of 2015.
For the full year, consolidated net sales climbed to $3.13 billion, compared to net sales of $2.66 billion in fiscal 2015. This growth was almost entirely driven by a 17.7% benefit of the Boulder Brands acquisition as well as higher net price realization of 0.2%, partially offset by unfavorable foreign currency translation of 0.1%. Gross profit for the year increased 23.7% to $916.1 million, or 29.3% of net sales, compared to gross profit of $740.5 million, or 27.9% of net sales, in the year-ago period.
“Our frozen segment delivered another very strong quarter, with net sales increasing 7.8%, fueled by higher volume mix of 6.3% and a 2% benefit from the Canadian businesses of the Boulder Brands acquisition, partially offset by lower net realized price of 0.5%,” commented CFO Craig D. Steeneck during an earnings call with financial analysts.
For the year, frozen net sales advanced 5.6% to $1.305 billion, compared to $1.236 billion in 2015. This growth reflected the benefits of higher volume/mix of 2.9%, increased net price realization of 0.8% and a 2.1% benefit from the Boulder Brands acquisition, partially offset by unfavorable foreign currency translation of 0.2%.
The Birds Eye franchise and, to a lesser extent, Hungry-Man drove the performance of the segment, fueled by both core business strength and successful innovation that were supported by double-digit growth in retail distribution for the year. New varieties behind the Birds Eye Flavor Full, Birds Eye Protein Blends and Birds Eye Disney-themed platforms, along with the new Birds Eye Veggie Made Rice and Birds Eye Signature Skillet Meals platforms, helped to drive an 8% increase in net sales for the Birds Eye franchise in 2016.
Hungry-Man strength was driven by the expansion of the Hungry-Man Selects line, with the introduction of 10 new varieties during the year. Partially offsetting the growth of Birds Eye and Hungry-Man were lower sales of the seafood business, Aunt Jemima breakfast products and Lender’s bagels.
EBIT for the frozen segment increased 10.2% to $240.9 million in 2016, compared to $218.5 million in 2015, reflecting the benefits of the net sales growth and strong productivity, partially offset by input cost inflation, investment behind the conversion to new Birds Eye Steamfresh stand-up packaging and the unfavorable impact versus year-ago of items affecting comparability. Excluding items affecting comparability, EBIT advanced 12.3% to $246.4 million.
“The strong Birds Eye momentum reflected broad-based growth across the franchise, with both the base business and innovation driving results,” said CEO Mark A. Clouse. “During the year, we launched 16 new Birds Eye varieties behind the flavorful protein blends and Disney-themed platforms. In the fourth quarter, we also launched in the limited distribution two new platforms, namely Birds Eye Veggie Made Rice side dishes and Birds Eye Signature Skillet Meals. Both are off to a good start and will be expanded nationally in the first half of this year. To ensure the continued momentum of the Birds Eye franchise, we are also launching five new platforms in 2017.”
The continued strength of Hungry-Man was driven by solid base business performance and the addition of 12 new varieties during the year, 10 of which were new premium tier Hungry-Man Selects.
“In-market performance for the frozen segment was also exceptionally strong, with retail consumption advancing 5.5% for the year and an impressive 9.5% for the month of December, with both periods fueled by the Birds Eye franchise. Similarly, market share for the Frozen segment advanced 1.2 share points in both periods,” said Clouse.
Heading into 2017, the company forecasts another strong year for its frozen business. However, a slower start is anticipated, given the exceptionally strong December sales of seasonally promoted products, particularly Birds Eye core vegetables, and the shift of Easter from the first quarter to the second quarter.
“The impact of a later Easter in 2017 is expected to shift approximately $15 million of net sales and about $0.01 of adjusted diluted EPS from Q1 to Q2,” said CFO Steeneck. “We expect the lion’s share of this impact to affect the frozen segment and, to a lesser extent, the grocery segment, due to the seasonal nature of those portfolios. Three extra weeks of Boulder Brands ownership added $22 million in net sales across the four segments and about $0.01 in adjusted diluted EPS in the month of January 2017.”
[Editor’s note: FrozenFoodsBiz.com thanks Seeking Alpha for providing a transcript of Pinnacle Foods’ earnings conference call. Readers who want to review the full text may do so by visiting www.SeekingAlpha.com.]
