Campbell Soup sales up, profits down

February 24, 2009 5:15:24 AM PST
The Campbell Soup Co. is selling more recession-friendly soups, pasta sauces and Goldfish crackers, but it's finding that a strong dollar has hurt its profits overseas.

The Camden-based company said Monday that its second-quarter profit dropped 15 percent overall. Earnings were $233 million, or 64 cents per share, for the three months ended Feb. 1. That's down from $274 million, or 71 cents per share, in the same period a year ago.

Excluding earnings from discontinued businesses - notably, the company sold the Godiva Chocolatier business last year - and one-time items relating to that sale, restructuring and a tax benefit last year, the company earned $234 million, or 65 cents per share. That's down 12 percent from $266 million or 69 cents per share a year ago.

On that basis, Campbell's performance was a penny per share higher than the consensus expectation of analysts surveyed by Thomson Reuters.

The company said its profits were hurt by the strengthening dollar. While Campbell - the world's largest soupmaker - is best known for the red-and-white-labelled soups that are staples of U.S. pantries, it operates around the world, including a fledgling broth business in China and Russia.

The company's international soup, sauce and drinks account for nearly one-fifth of total sales. Additionally, it owns the Australian biscuit brand Arnott's.

Sales for the quarter came to $2.12 billion, down about 4 percent from last year's second quarter mark of $2.22 billion.

Soup sales in the U.S rose 4 percent for the quarter, and sales for the whole U.S. soup division, which includes sauces and beverages, rose 3 percent. Other divisions, such as baked and snack goods and international soup, sauces and beverages, saw slower growth or decreases in sales. Food service sales also slid significantly as more people ate at home.

President and CEO Douglas R. Conant said Monday that the company will continue to weather the recession because its main offering is the kind of food people eat more when times are tough.

But Campbell also said that major retailers cut back on their inventories at the end of 2008, a trend that other foodmakers have also noted. The company said that especially hurt its condensed soup, Prego pasta sauces and Pace Mexican sauces, where it did not benefit as much as it would have from higher consumer sales.

On a conference call Monday, Conant reassured analysts fretting about retailers cutting inventory.

"It's about as low as it's going to go," he said.

For the first six months of its fiscal year, the company earned $493 million, or $1.35 per share on sales of $4.37 billion. All those figures were down from the first half of the previous year, when earnings were $544 million, or $1.41 per share, on sales of $4.40 billion.

Campbell is maintaining its projection of 3 percent to 4 percent sales growth for the fiscal year and expects its profits for the year to be at the high end of the previously projected 5 percent to 7 percent growth range.

Shares in the company fell 82 cents, or 2.8 percent, to close at $28.63 on Monday, near the lower end of its range over the past 52 weeks, when it has sold for between $27.35 and $40.85.

Jack Russo, who follows Campbell for Edward Jones, said the declines are due mostly to a poor overall economy.

"These companies, their results get hit back a little bit, too," he said.

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