A huge surge in fertilizer and other commodity trading significantly boosted the results at ConAgra Foods Inc. in the fourth quarter ending May 27, helping the company offset the losses triggered by its contaminated Peter Pan peanut butter, which plagued its food business during the company’s second half.
Operating profits at ConAgra’s Trading and Merchandising unit, which includes fertilizer trading and distribution, were up 376.9 percent for the quarter, to $200.3 million on sales of $659.2 million, versus the year-ago $42 million and $359 million, respectively. ConAgra does not break out fertilizer results; however, sources say the quarter’s performance would have been phenomenal. By comparison, operating profits at ConAgra’s other businesses were either off (Consumer Foods 15.4 percent and International Foods 23.9 percent), or up modestly (Food and Ingredients 10.4 percent). ConAgra-wide, operating profit was up 37.1 percent to $489.2 million, versus the year-ago $356.8 million.
ConAgra fourth-quarter net sales were up 224.3 percent, to $192.0 million ($.39 per diluted share) versus the year-ago $59.2 million ($.11 per share). Sales were up 13.2 percent to $3.33 billion from $2.94 billion.
T&M operating profit for the quarter reached a $200 million record, almost five times year-ago amounts. Energy trading and fertilizer operations reported their highest quarterly profit ever by successfully capitalizing on the market environment, said the company. ConAgra’s fertilizer business has some 77 locations and over 1 million st of storage so as to take advantage of a hot fertilizer market.
ConAgra officials told analysts the T&M performance was impressive by any standard and knocked the cover off the ball. However, the company said it views segment profitability to be extraordinary, and plans fiscal 2008 profitability from this segment to be significantly lower than fiscal 2007 levels. Citing the current positive tone in the fertilizer market, analysts prodded the company about this assessment; however, executives said they wished to be conservative and not over promise. Next year is yet to be determined, said Greg Heckman, president and chief operating officer of Commercial Products, who said that while next year should be a good environment, it may still not be as robust as this year. He said it is expected to outpace the five-year average.
Overall, ConAgra believes fiscal 2008 will be see an approximate earnings per share of $1.48, down from fiscal 2007’s $1.51. ConAgra believes its other businesses will step up to compensate for the expected decline in T&M. It values the T&M next year at $.15 per EPS. ConAgra was optimistic about its other businesses, citing innovation, marketing, pricing, and cost-saving initiatives. Plus, Peter Pan, one of ConAgra’s core products, it is expected to fly back on the shelves in late July.
For the year ending May 27, 2007, T&M reported a 68 percent increase in operating profit and a 22.7 percent increase in sales. Operating profit was $317.1 million on sales of $1.45 billion, versus the prior year’s $188.8 million and $1.18 billion, respectively. T&M led all four divisions in percentage changes in profits and sales, with the giant Consumer Food business increasing profits by a marginal 2.4 percent on a .3 percent decrease in sales.
For the year, ConAgra net income was up 43.2 percent to $764.6 million ($1.51 per share), versus the prior year’s $533.8 million ($1.03 per share). Net sales were up 4.8 percent to $12.0 billion from $11.48 billion.