Campbell profit up on Godiva sale

May 19, 2008 9:18:00 AM PDT
Declining soup sales and higher prices for ingredients contributed to a difficult quarter for the Campbell Soup Co., even though a gain on the sale of its Godiva Chocolatier brand sweetened its bottom line. Its shares fell more than 5 percent in midday trading.

The Camden-based food company earned $532 million, or $1.40 per share, in the three months ended April 27. That was up from $217 million, or 55 cents a share, a year ago.

But the latest results include the $850 million sale of Godiva to Yildiz Holding AS. After taxes, Campbell had a $467 million gain on the sale.

Excluding one-time items - including receipts from the March 18 Godiva sale, which was partially offset by the cost of previously announced restructuring - Campbell said its earnings were $165 million, or 43 cents per share, down 7.8 percent from an adjusted $179 million, or 45 cents per share, a year ago.

The latest results are one penny per share short of the 44 cents per share consensus expectation of analysts surveyed by Thomson Financial.

The company reiterated its expectations of profit growth of 5 to 7 percent for the fiscal year. Company officials said on a conference call that it will take a strong fourth-quarter to meet that target.

Revenue rose to $1.88 billion from $1.75 billion a year ago.

Its shares fell $1.89, or 5.3 percent, to $34.06 in midday trading.

On a conference call with analysts Monday, President and CEO Douglas Conant was contrite and tried to assure investors that soup sales would rebound.

Soup sales were down 3 percent compared with an unusually strong third quarter in 2007. Condensed soup sales were flat, while ready-to-serve products slipped 9 percent.

"We clearly have to step up our game in condensed soup," said Conant, who came to Campbell more than seven years ago and is credited with turning around long-eroding sales of the company's iconic condensed soups.

Conant said that higher prices hurt sales. While some sales slippage was expected, he said, the company miscalculated how much it would be.

He cited the ready-to-serve Chunky line. A year ago, he said, shoppers could get 4 cans for $5 on sale. Now, he said, it's 4 cans for $6.

He also said Campbells' competitors had "out-innovated" the company in ready-to-serve soups this year. But, Conant repeated that he is "bullish" on the company's soup prospects, largely because of a growing line of lower-sodium soups.

Like other food companies, Campbell's said its profit margin is being pinched by higher costs of ingredients.

For instance, the company said sales were up by more than 10 percent in all three divisions of its Pepperidge Farm brand: cookies and crackers, bakery, and frozen. But earnings for Pepperidge Farm were flat. The company blamed commodity prices.

"This fiscal year has turned out to be one of the most inflationary and volatile that I have experienced in my career in the industry," said Robert A. Schiffner, the company's chief financial officer.

Schiffner said he does not expect the company's profit margin to return to last year's levels in fiscal 2009.

For the first nine months of the fiscal year, Campbell's brought earned $1.08 billion, or $2.79 per share, up from $793 million, or $1.99 per share. Revenue rose to $6.28 billion from $5.87 billion a year ago.

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