USA – Campbell Soup has reported 25% increase in net sales to US$5.4 billion in the first half, boosted by acquisitions of Snyder’s-Lance and Pacific Foods.
Mark Clouse, Campbell’s President and CEO stated that the second consecutive quarter delivered sales and earnings in line with expectations, reaffirming the company full-year guidance for fiscal 2019.
EBIT decreased 44% to US$369 million while net interest expense was US$185 million compared to US$62 million in the prior year, reflecting higher levels of debt associated with the recent acquisitions.
The company completed the acquisition of Snyder’s-Lance, Inc. for US$6.1 billion, which it integrated with Pepperidge Farm to form Campbell Snacks, led by Carlos Abrams-Rivera.
Campbell which also acquired organic broth and soup producer, Pacific Foods for US$700 million in 2017, said it recorded higher average interest rates on the debt portfolio.
In the quarter, organic sales benefited from gains in Global Biscuits and Snacks, offset by declines in Campbell Fresh and Meals and Beverages and currency translation.
Gross margin decreased from 35.1% to 26.3% impacted by cost inflation and higher supply chain costs, as well as higher promotional investment.
With a strategy to pursue divestitures, the company has reaffirmed 2019 guidance and expects net sales of between US$7.92 billion to US$8.05 billion and US$2.40 to US$2.50 in earnings per share.
“I am pleased that, for the second consecutive quarter, we delivered sales and earnings performance in line with our expectations, enabling us to reaffirm our full-year guidance for fiscal 2019,” said Mark Clouse who joined the company as President and CEO after the abrupt departure of Denise Morrison in May last year.
“During the quarter, we continued to make progress against key strategic initiatives.
Our efforts to stabilize our core business, integrate Snyder’s-Lance, deliver our cost savings agenda and focus and optimize the portfolio are all on track.
Over time, these actions will enable us to increase investments in our core businesses while significantly reducing debt and creating meaningful value for shareholders.
While we have made steady progress, there is much more work to be done to fully unlock the potential of our business.
Global Biscuits and Snacks recorded 76% increase in sales to US$1.24 billion, becoming the its largest division, thanks to Snyder’s-Lance buy.
Organic sales decreased 1% in the Meals and Beverages segment due to increase in consumption of V8 vegetable juice and V8 Energy, which were offset by declines in Plum, Canada and Prego pasta sauces.
Sales of U.S. soup were comparable to the prior year with gains in ready-to-serve soups and broth, offset by declines in condensed soups.
In Campbell Fresh, Bolthouse Farms refrigerated beverages and Garden-Fresh Gourmet declined offset partly by gains in carrots.
After yielding to pressure from activist investor Third Point, Campbell has embarked on a strategic portfolio review with a focus on its core snacks, meals and beverage businesses.
The company has agreed to sell its branded refrigerated salsa brand, Garden Fresh Gourmet, and refrigerated soup plant in Everett, Washington.