I doubt this surprise loyal Motley Fool readers, but food is not exactly a high-growth industry. Nevertheless, even by industry standards, ConAgra's
Top-line growth was disappointing -- whether you look at the reported growth rate of negative 4% or the adjusted rate of positive 4% (adjusted for an extra week in the year-ago quarter) -- and revenue missed the mean analyst estimate. Net income performance was even worse; reported net income dropped 40% over the past year.
In the retail products line (which provides more than half of the company's revenue base), adjusted sales growth rose 1%, but operating profit slumped 12%. Sales of the top 30 brands grew a sluggish 2%, and packaged meats were once again weak.
ConAgra's other businesses, food service and food ingredients, saw mixed results. Food service sales were flat, and operating profit was down 40%. In food ingredients, adjusted sales climbed 18% and operating profits jumped 26%. Before investors get too excited about this, though, they should realize that trading and merchandising operations were a big part of this performance, and management expects profitability to decline next year.
I'd like to talk about the cash flow statement, but ConAgra doesn't provide one in its financial press release. For a company of ConAgra's size (nearly $12 billion in market capitalization), I find that really surprising and discouraging. Then again, this is a company that only recently began conducting Q&A sessions on its conference call.
The company seems committed to maintaining its dividend. This was something of a hot topic on the conference call, when more than one caller wondered whether ConAgra management was comfortable with the now quite high dividend payout ratio.
ConAgra clearly has work to do. Workforce reductions and plant rationalizations will help the cost structure, but that will take time. Elsewhere, the company is committed to jettisoning low-margin SKUs, or stock-keeping units, and expects to continue to cut SKUs at a low double-digit pace for the next few years.
Time will tell if those projects bear fruit. Much as I'd like to see this hometown food giant make good, I'd probably be more interested in the likes of Heinz
For more Foolish foodie takes:
- Breakfast of Runners-Up
- Dozing on Del Monte Foods
- Heinz Hits the Sauce
- From Sows' Ears to Silk Purses
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).