ConAgra Foods 3Q net income drops on rising costs

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By MICHELLE CHAPMAN
The Associated Press
Thursday, March 24, 2011; 11:06 AM

NEW YORK -- Escalating costs helped push ConAgra Foods Inc.'s fiscal third-quarter net income down 6 percent, but the maker of Healthy Choice and Chef Boyardee absorbed some of the impact through increased prices.

ConAgra indicated in December that it was raising prices, mirroring many other food makers, including General Mills Inc., all of whom are dealing with rising prices for corn, wheat and other ingredients.

Food makers initially benefited from the economic downturn because people ate at home more. But higher ingredient costs and price-conscious shoppers have started to pressure ConAgra and the sector.

CEO Gary Rodkin said during a conference call that he expects rising costs will continue, with the company raising prices as needed.

"We have developed realistic plans to deal with difficult conditions," he said.

Aside from price hikes, these plans include cost-control efforts and new products.

On Thursday the Omaha, Neb. company reported net income of $214.8 million, or 50 cents per share, for the period ended Feb. 27. That's down from $229.6 million, or 51 cents per share, a year earlier.

Earnings from continuing operations rose to 50 cents per share from 49 cents per share.

The results beat the forecast of analysts surveyed by FactSet, who were looking for 46 cents per share.

On Wednesday General Mills reported that its fiscal third-quarter net income climbed through the sale of more snacks and strength abroad.

ConAgra's quarterly revenue climbed 4 percent to $3.15 billion, surpassing the $3.12 billion Wall Street expected.

The company's stock gained 17 cents to $23.10 in morning trading.

Revenue for the consumer foods division, two-thirds of ConAgra's business, climbed to $2.08 billion from $2.03 billion.

Among ConAgra's strongest-performing brands were Banquet, Peter Pan, Healthy Choice, Hebrew National and Slim Jim.

Rodkin said ConAgra is focusing on expanding its frozen food lines, including Banquet, Healthy Choice and Marie Callender's, as the brands posted better results in the quarter.

The commercial foods unit reported its revenue rose to $1.07 billion from $996.1 million, helped by higher selling prices in its flour milling operations. The segment also benefited from volume growth for its Lamb Weston specialty potato products.

Rodkin said the division, which comprises 34 percent of ConAgra's total third-quarter revenue, will concentrate on high-margin products such as sweet potatoes.

For the full year, ConAgra still expects a low single-digit percentage increase from the previous year's $1.74 per share. Analysts predict $1.75 per share.

While ConAgra expects its fourth-quarter earnings to improve from last year, the food maker said the quarter will likely come in below its third-quarter performance, mostly because of accelerating inflation and higher-than-expected third-quarter flour milling profits.


© 2011 The Associated Press

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