food

Campbell's Logs Solid Fiscal '08, Despite Rising Input Costs

can of Campbells low sodium Chicken Noodle SoupCampbell Soup Co. had a solid fiscal '08 despite the significant increases in raw materials costs currently challenging virtually all food and beverage companies.

 

  The company's full-year net earnings rose by 36% to $1.165 billion, versus $854 million last fiscal, and its per-share price jumped to $3.06 versus $2.16 last year.

Adjusted net earnings (excluding items impacting comparability, such as a 53rd week in the '08 fiscal results) were up 3.4%--to $797 million, compared to $771 million last fiscal year. Adjusted net earnings per share were $2.09, versus $1.95 in fiscal '07.

Companywide sales grew 8%, to $8 billion, versus $7.4 billion last fiscal.

In the fourth quarter, companywide sales increased 13%, to $1.7 billion, and net earnings jumped 46%, to $89 million.

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Campbell's president and CEO, Douglas R. Conant, noted that the strong Q4 results completed "a challenging year in which we faced unprecedented cost inflation," adding that this marks the sixth consecutive year that the company has met or exceeded its financial guidance.

"Our more focused portfolio strategy is paying off," he said, pointing to sales and earnings growth in each of the company's three core categories: "simple meals," baked snacks and healthy beverages.

"Campbell's is a strong food company that's ahead of the curve compared to its counterparts in terms of staying ahead of costs, raising prices and divesting when they need to," observes Christopher Shanahan, research analyst, chemicals, materials and food for market research company Frost & Sullivan. "They have a very diverse product line, and solid growth strategies for both U.S. and international.

"Their performance is better than I expected, given that all food companies are experiencing shrink in gross margins as a result of higher input costs," Shanahan continues. "For Campbell's, the costs of all primary inputs are rising, including salt, corn syrup and tomatoes. Campbell's price increases certainly played an important part in their results. And while consumer demand can't be increasing that much in this economic environment, they may be benefiting from consumers cutting back on fresh products like meat and vegetables and spending more on affordable foods in the center store."

Shanahan also credits Campbell's focus on the health/wellness market in both product lines and marketing for its performance, citing the success of its heavily promoted new low-sodium soups and the continually expanding line of V-8 products (including this month's introduction of V-8 soups) as prime examples.

In presenting the results, Conant also focused on the success of the wellness strategy, including the low-sodium soups and double-digit sales growth for V-8 (particularly through the V-8 V-Fusion line). He added that the introduction of Select Harvest ready-to-serve soups is expected to be a key growth-driver in 2009. In addition, he said that Pepperidge Farm had an "outstanding" year in 2008, and that Arnott's core biscuit business showed strong performance.

For 2009, Campbell's expects continuing operations--excluding the impact of one less week in the fiscal-year reporting period and recent divestitures--to deliver sales growth exceeding the company's long-term target range of 3% to 4%. EBIT growth is projected at slightly below the long-term target growth rate of 5% to 6%, reflecting the return to a 52-week reporting year, higher marketing spend on new products in the U.S., and increased investment spending in Russia and China. Adjusted net earnings-per-share growth is projected at 5% to 7% from the fiscal 2008 adjusted base of $2.09.

More highlights of Campbell's full-year results:

* U.S. soup, sauces and beverages sales increased 5%, to $3.7 billion (including a 2% gain for soup sales). Volume/mix added 3% and price increases and sales allowances added 2%. Increased marketing spend subtracted 1%.

* U.S. condensed soup sales were flat, with gains in cooking varieties offset by declines in eating varieties. Ready-to-serve soup sales increased 1%. Gains in Campbell's Chunky and Campbell's Select soup in cans were partially offset by declines in convenience lines, which include soups in microwavable bowls and cups. Sales continued to benefit from the success of lower-sodium products, and Swanson broth sales increased 11%.

* U.S. beverage sales benefited from gains in V-8 traditional vegetable juice, V-Fusion and V-8 Splash juice drinks, as well as a new agreement with Coca-Cola to distribute Campbell's single-serve refrigerated beverages in North America.

* Sales of baking and snacking products rose 11%, to $2.1 billion. Volume/mix added 2%, price increases and sales allowances added 6%, and currency added 5%. Increased marketing subtracted 1%.

* International soup, sauces and beverages grew 15%, to $1.6 billion. Volume/mix added 2%, and currency added 11%.

* North American foodservice sales rose 3%, to $656 million.

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