Del Monte net sales up 5.8% in Q1

Del Monte net sales up 5.8% in Q1

Net sales for the first quarter fiscal 2013 rose to $821.1 million, driven by new and existing product volume increases.

Announcement Highlights

For the first quarter fiscal 2013:

  • Net sales increased 5.8 percent
    • Pet Products sales increased 8.6 percent due to new product and existing product volume growth
    • Consumer Products sales increased 2.4 percent due to list pricing actions net of trade spend
  • Operating income declined 7.1 percent from $49.3 million to $45.8 million mainly due to increased marketing costs and costs associated with closure of the Kingsburg, California facility
  • Other income of $25.8 million comprised primarily of gains on commodity hedging contracts
  • Adjusted EBITDA increased 12.3 percent to $113.6 million from $101.2 million
  • Total net debt was $3,619.6 million as of July 29, 2012
  • Announced Pet pricing actions of approximately 5 percent to 7 percent across most of the portfolio, effective November 2012

Del Monte Foods three months ended July 29, 2012
Del Monte Foods reported net sales for the first quarter fiscal 2013 of $821.1 million compared to $776.2 million for the three months ended July 31, 2011, an increase of 5.8 percent. New and existing product volumes drove the increase. List pricing actions net of trade spend also contributed positively to net sales.

Operating income declined 7.1 percent from $49.3 million in the prior year period to $45.8 million. The decrease was primarily driven by increased marketing costs and costs associated with the closure of the Company’s Kingsburg, California facility. The decline was partially offset by the positive impact of the topline and list pricing actions net of trade spend.

Other income of $25.8 million for the three months ended July 29, 2012 was comprised primarily of gains on commodity hedging contracts, partially offset by losses on interest rate swaps. The gains on commodity hedging contracts recorded in the quarter, the cash portion of which are reflected in Corporate Adjusted EBITDA, partially offset both ingredient cost increases seen in cost of products sold and ingredient cost increases that we expect to see in future quarters.

Adjusted EBITDA increased 12.3 percent to $113.6 million compared to $101.2 million in the prior year period. Cash benefits from economic hedge positions are reflected in Corporate Adjusted EBITDA as noted above. The positive impact of the topline, partially offset by increased operating and marketing costs, contributed to the increase. In calculating Adjusted EBITDA, the adjustment for cash benefits from economic hedge positions is calculated pursuant to the Company’s 7.625 percent Notes Indenture and credit agreements, respectively.

“The Company’s first quarter results reflect strong topline momentum,” said Dave West, CEO of Del Monte Foods. “Recent Pet Product launches such as Meow Mix Tender Centers and Meow Mix Paté Toppers contributed strongly to the topline. We remain focused on generating long-term growth by investing behind our brands in both Pet and Consumer, as well as driving innovation. In order to partially offset dramatic input cost increases caused by the severe drought conditions in the U.S., we recently announced pricing actions of approximately 5  percent to 7 percent across most of the Pet Products portfolio.”

Reportable segments – results for three months ended July 29, 2012

Pet Products
Pet Products net sales were $458.3 million, an increase of 8.6 percent from net sales of $422.0 million in the prior year period. The increase in Pet Products net sales was driven by new products, as well as existing product volume growth, primarily in pet snacks. List pricing actions net of trade spend also positively contributed to net sales.

Pet Products operating income declined 8.4 percent from $56.2 million for the three months ended July 31, 2011 to $51.5 million in the first quarter fiscal 2013. The decline was primarily due to higher operating and marketing costs. The positive impact of the topline partially offset the decline.

Pet Products Adjusted EBITDA declined from $74.1 million for the three months ended July 31, 2011 to $71.6 million in the first quarter fiscal 2013, or 3.4 percent. The drivers of Adjusted EBITDA are similar to those of operating income described above.

Consumer Products
Consumer Products net sales were $362.8 million, an increase of 2.4 percent from net sales of $354.2 million in the prior year period. The increase in Consumer Products net sales was primarily due to list pricing actions net of trade spend and an increase in non-retail sales.

Consumer Products operating income declined 4.2 percent from $14.4 million for the three months ended July 31, 2011 to $13.8 million in the first quarter fiscal 2013. The decline was primarily driven by the higher marketing costs behind the Del Monte brand revitalization. List pricing actions net of trade spend partially offset the decline.

Consumer Products Adjusted EBITDA increased from $27.8 million for the three months ended July 31, 2011 to $30.6 million in the first quarter fiscal 2013, or 10.1 percent. The increase was impacted by list pricing actions net of trade spend, which were partially offset by higher marketing costs.

 

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