Conagra Brands revises 2025 outlook amid supply chain disruptions
USA – Conagra Brands Inc. has adjusted its financial projections for fiscal 2025 after facing supply chain setbacks and operational difficulties earlier in the year.
The Chicago-based food company experienced disruptions in its supply of chicken for frozen meals and encountered challenges with frozen vegetable availability.
A major issue stemmed from “product quality inconsistencies” at a poultry facility responsible for preparing and cooking chicken for its frozen meal brands.
As a result, Conagra temporarily halted production and later resumed at a slower rate to maintain product consistency.
The company stated in a recent press release that these disruptions led to reduced volume, net sales, and profitability in the second half of the fiscal year.
Financial Adjustments for 2025
Conagra now expects organic net sales to decline by around 2%, widening from the previous forecast of a 0% to 1.5% drop. Despite this, the company maintains its long-term goal of achieving low single-digit growth.
The adjusted operating margin has been revised downward to 14.4%, compared to an earlier estimate of 14.8%. Conagra continues to aim for a mid- to high-teens margin over the long run.
Earnings per share (EPS) are projected at approximately US$2.35, down from the earlier guidance of US$2.45 to US$2.50 per share issued in December.
Additionally, the net leverage ratio has increased to 3.55 times EBITDA from 3.4 times, with a long-term target of 3 times EBITDA.
Conagra’s product lineup includes well-known protein-based brands such as Slim Jim, Healthy Choice, Marie Callender’s, Duke’s, Banquet, and Frontera, along with the plant-based brand Gardein.
First-Quarter Results Reflect Supply Chain Impact
Conagra reported its financial performance for the first quarter of fiscal 2025, which ended on August 25, 2024, revealing declines across key metrics.
Net sales fell to US$2.8 billion, impacted by a 3.5% decrease in organic sales, a 0.4% loss due to unfavorable foreign exchange rates, and a minor 0.1% increase from mergers and acquisitions.
Organic sales declined due to a 1.9% drop in price and mix, which the company linked to strategic pricing adjustments, and a 1.6% decrease in sales volume.
Disruptions at its Hebrew National brand during the peak grilling season reduced revenue by an estimated US$27 million.
Overall, net sales for the first quarter dropped by 3.8%, with organic net sales decreasing by 3.5%.
The company’s operating margin stood at 14.4%, marking a 247 basis point decline from the same period last year. On an adjusted basis, the margin was 14.2%, down 244 basis points.
Gross profit fell by 10.2% year-over-year to US$739 million, while adjusted gross profit dropped 9.4% to US$726 million. Conagra attributed the decline to lower organic sales, cost inflation, and weaker operating leverage.
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