Campbell Q3 reverses downward earnings trend

Posted by Nicole Eckersley on 24th May 2011

Campbell’s Soup - low sodiumCampbell Soup Co. has reversed a trend of downward earnings in its third quarter, booking an increase in profits as snack and international sales propelled gains.

The US soup maker revealed today (23 May) that net earnings for the three months ended 1 May totalled US$187m, up from $168m in the comparable period of last year.

Sales edged up 0.6% to $1.81bn in the period, as the company’s snacks and international units (including increased sales in Australia due to the high dollar and “solid gains” in Australian soup) offset weakness at its US soup business. Baking and snacks sales rose 10% while international soup, sauces and beverages sales grew 7%, mostly thanks to currency impacts.

Sales at Arnott’s increased due to currency and sales gains in savory crackers, led by Shapes, Cruskits and Vita-Weat, along with growth in the Tim Tam and Tiny Teddy sweet biscuit varieties.

US soup sales were down 7% in the past quarter, including a 15% drop in ready-to-serve soups, the company revealed.

The improved third-quarter performance was not enough to lift Campbell’s year-to-date comparisons. Net earnings for the first nine months totalled $705m, compared with $731m a year earlier. For the first nine months, sales were $6.11bn, a decrease of 1% from the year-ago period.

Campbell had initially responded to the increasingly price sensitive and competitive nature of the US soup market by ramping up its promotional activity and cutting prices. However, after a poor first half performance, the company said that it would reverse this strategy by focusing on brand-building and marketing activities.

“After heavy discounting in US soup during the first half, we began shifting our marketing investments in the third quarter toward brand-building initiatives. Over time we anticipate that these efforts, combined with accelerated and targeted innovation, will improve price realisation and strengthen brand equity,” Campbell COO Denise Morrison said.

At the end of February, Campbell lowered its full-year outlook from a 2-4% increase in earnings to a decline in EBIT of 3-5%.

Net sales were expected to fall in a range of 1% to negative 1%, while EPS was expected to fall by between 1% and 3%. Today, the company said that it expected its full-year results to come in at the high end of its guidance.

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