Campbell Soup profit rises amid turnaround

Candice Choi And Michelle Chapman
September 05, 2012
AAP

CAMPBELL Soup is preparing to flood supermarket shelves with dozens of new products in the year ahead, but the push to revive its mainstay soup business isn’t expected to pay off anytime soon.

The New-Jersey-based company on Tuesday said it expected the vast majority of its sales growth in fiscal 2013 to come from its recent acquisition of Bolthouse Farms, which Campbell expects to position it in the faster-growing premium juice market.

As for the new soups and sauces, chief executive Denise Morrison said Campbell should have a better read on how they’ll fare after the fiscal first quarter.
“The consumer will let us know if we can be more exuberant,” she said.

In the year ahead, Campbell plans to introduce 50 new products, including soups in flavours such as Moroccan chicken and Coconut curry. It hopes the new products, which come in trendy pouches instead of cans, will help the company court younger consumers.

But Campbell warned it still faced a challenging economic environment, with consumers making fewer trips to grocery stores and spending less per visit. The company also emphasised it was taking longer than expected to return to its long-term growth targets.

“The consumer continues to be cautious and that is not likely to change in the near future,” Morrison said.

For its fiscal fourth quarter, Campbell reported a higher-than-expected profit as soup sales rose nine per cent. It was the first sales increase for the unit in more than two years and the biggest gain since the first quarter of 2009.

The increase was driven by retailers running promotions and stocking up on inventories of its condensed soups, such as chicken noodle and tomato. A five per cent price hike also contributed to growth.

Year-to-date, Campbell’s overall market share of soups is, nevertheless, down 2.9 per cent, according to SymphonyIRI. Other brands collectively saw a 10 per cent share increase in terms of dollars, while store-brand varieties enjoyed a 2.1 per cent increase.

The company also noted in a conference call with investors that recent price increases could hurt soup volumes in the months ahead.

Campbell Soup Co said it earnt $US127 million ($A124.71 million), or 40 US cents per share, for the period ended July 29. In the year ago period – when the company was weighed down by restructuring charges – it earnt $US100 million ($A98.20 million), or 31 US cents per share.

Stripping out acquisition-related costs in the latest quarter, earnings were 41 US cents per share. Analysts surveyed by FactSet expected 39 US cents per share.
Revenue was basically flat at $US1.61 billion ($A1.58 billion), but beat Wall Street’s $US1.59 billion ($A1.56 billion) estimate.

Condensed soup sales rose 14 per cent and broth sales climbed four per cent. Sales of ready-to-serve soups edged up one per cent, with sales of “Chunky” soups up slightly.

Its new “Slow Kettle” soups also contributed to growth, although the company did not give specifics.

Gross margin declined mostly because of higher costs and increased promotional spending, which were somewhat offset by higher selling prices and productivity improvements.

Sales of sauces rose four per cent in the US on improved sales of Prego pasta sauces and Pace Mexican sauces. Sales for US beverages climbed three per cent, led by increased sales of “V8 Splash” and better sales of “V8 V-Fusion”.

The global baking and snacking segment reported a one per cent decline in sales, with sales of frozen products falling. Sales of Pepperidge Farm products and Goldfish snack crackers were strong.

North American foodservices sales dropped three per cent, while sales of international simple meals and beverages fell seven per cent partly because of unfavourable foreign exchange rates.

For the full year, Campbell earnt $US774 million ($A760.05 million), or $US2.41 per share, down from $US805 million ($A790.49 million), or $US2.42 per share, in the previous year. Annual revenue dipped slightly to $US7.71 billion ($A7.57 billion).

For fiscal 2013, Campbell foresees adjusted earnings of $US2.51 to $US2.57 per share. Revenue is expected to climb 10 percent to 12 percent, implying a range of $US8.48 billion ($A8.33 billion) to $US8.64 billion ($A8.48 billion).

Wall Street expects earnings of $US2.52 per share on revenue of $US8.47 billion ($A8.32 billion).

The company’s shares fell two US cents to close at $US35.12 on Tuesday after rising as high as $US36.28 earlier in the session, their highest level since November 2010.