ConAgra Foods Names Connolly New CEO, Revises EPS Outlook
- Profitability for the Private Brands segment is weaker than expected due to fierce price competition as well as execution shortfalls, which together have negatively impacted recent results and near-term expectations for volumes, pricing, and margins. The company says that it is highly focused on implementing significant changes to improve execution, strengthen customer relationships, and improve the outcome of future bids.
These changes have begun and will continue to be implemented over the next several quarters, and are expected to start improving results in fiscal 2016. As a result of the weaker profit outlook, ConAgra will be evaluating the need for an additional non-cash impairment charge on the carrying value of goodwill in the Private Brands segment in connection with the preparation of the company’s fiscal third-quarter financial statements.
- The ongoing longshoremen labor dispute on the US West Coast has continued longer than expected, which has negatively impacted exports of Lamb Weston frozen potato products (in the Commercial Foods segment) to international markets. To a lesser extent, some international shipments for branded products in the Consumer Foods segment have been impacted as well.
ConAgra originally expected the labor dispute to be resolved in the winter, but now assumes the dispute will continue into the spring. The company thus anticipates a backlog of shipments for some period of time after the dispute is resolved.
As this story was being filed on the night of February 12, reports were being received that US West Coast seaports, which were closed on Thursday, would also be shut down from Saturday through Monday. According to Steve Getzug, a spokesman for the Pacific Maritime Association, terminal operators were not keen on paying union longshoremen hourly rates that would amount to 50% higher than normal pay, or close to $100 per hour, over the weekend and on Presidents’ Day (February 16).
Omaha, Nebraska, USA-headquartered ConAgra Foods announced on February 12 that 49-year-old Sean M. Connolly will replace Gary M. Rodkin as its chief executive officer effective April 6. Connolly was previously president and ceo of The Hillshire Brands Company from the time of its formation as an independent company in 2012 until it was sold to Tyson Foods in August 2014. Prior to that he served as ceo for Sara Lee North American Retail and Foodservice, as well as president of Campbell Soup North America.
Meanwhile ConAgra, a diversified food company whose frozen products range from Healthy Choice, Marie Callender’s and Banquet ready meals to Lamb Weston french fries, has reported that fiscal 2015 comparable earnings per share (EPS) are expected to be lower than previously anticipated. The company originally expected to post a mid-single digit rate of comparable EPS growth in fiscal 2015. It now believes that comparable fiscal 2015 EPS will be in the range of $2.13-$2.18. Fiscal 2015 operating cash flow is anticipated to approximate $1.6 billion,
The company, which remains committed to a strong dividend, expects to meet its debt reduction goals this year.
A strengthening dollar has negatively impacted the EPS outlook, as has a higher-than-planned mark-to-market loss from certain commodity index hedges. Two operating issues account for the majority of the change in EPS expectations, as detailed below: