Release Date: July 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Conagra Brands Inc (CAG, Financial) demonstrated solid progress throughout fiscal '24 amidst a challenging consumer environment.
- The company reported full-year adjusted gross and operating margin expansion supported by productivity improvements across the supply chain.
- Strong free cash flow enabled Conagra Brands Inc (CAG) to reduce its net leverage ratio and strengthen its balance sheet.
- The company saw significant volume recovery in its domestic retail business, particularly in the frozen and snacks categories.
- Conagra Brands Inc (CAG) achieved a 4% cost savings as a percentage of cost of goods sold, reaching its long-term target.
Negative Points
- Organic net sales and adjusted EPS saw one-year declines.
- The consumer environment is expected to remain challenging in fiscal '25, leading to a tempered outlook.
- Volume declines were observed in the Grocery and Snacks and Foodservice segments.
- Adjusted operating margin in the refrigerated and frozen segment declined due to increased trade merchandising investments.
- The company anticipates a decline in adjusted operating margin for fiscal '25 compared to fiscal '24.
Q & A Highlights
Q: Can you provide more details on the volume recovery in your domestic retail business?
A: (Sean Connolly, CEO) We saw significant volume recovery in the second half of the year, particularly in our key domains of snacks and frozen. Snacks returned to growth in Q4, and frozen is close to doing the same. This recovery is a result of our strategic investments in brand-building and trade merchandising.
Q: How did your cost savings initiatives impact your financial performance in fiscal '24?
A: (David Marberger, CFO) Our cost savings initiatives were highly effective, reaching our long-term target of approximately 4% of cost of goods sold. This helped us achieve adjusted gross margin expansion of 58 basis points and adjusted operating margin expansion of 34 basis points for the year.
Q: What are your expectations for fiscal '25 in terms of consumer environment and financial performance?
A: (Sean Connolly, CEO) We anticipate a challenging consumer environment but expect a gradual transition toward a more normalized operating environment. We are guiding to an organic net sales range of -1.5% to flat, adjusted operating margin of 15.6% to 15.8%, and adjusted EPS of $2.60 to $2.65.
Q: Can you elaborate on the performance of your frozen single-serve meals category?
A: (Sean Connolly, CEO) Our investments in frozen single-serve meals drove steady improvement throughout fiscal '24, and in Q4, we returned to volume growth, significantly outpacing the category. This has enabled us to achieve record share levels in this category.
Q: How did your international business perform in Q4?
A: (David Marberger, CFO) Our international business delivered another strong sales quarter with both volume and price mix up year-over-year. This was driven by strong results from our Mexico and global export businesses.
Q: What are your plans for capital expenditures in fiscal '25?
A: (David Marberger, CFO) We are projecting capital expenditures of $500 million for fiscal '25. These investments will support our ongoing strategic initiatives and productivity improvements.
Q: How did your snacks business perform in Q4?
A: (Sean Connolly, CEO) We saw strong momentum in our snacks business in Q4, driven by our on-trend snacking brands like Duke's, David, and Angie's Boomchickapop. This helped us gain share in a challenging market environment.
Q: What is your outlook for Ardent Mills in fiscal '25?
A: (David Marberger, CFO) We expect Ardent Mills to deliver another strong year, although not at the level of fiscal '24. The decrease in fiscal '24 results reflects a move towards a more normalized commodity revenue environment.
Q: How did your free cash flow and net leverage ratio improve in fiscal '24?
A: (David Marberger, CFO) We improved our free cash flow by approximately $1 billion over fiscal '23 and reduced our net leverage ratio to 3.37 times. This was achieved through strong supply chain productivity and effective cost management.
Q: What are your key assumptions for fiscal '25?
A: (Sean Connolly, CEO) We expect our brands to benefit from ongoing strategic investments, continued cost savings and productivity initiatives, and a gradual improvement in the consumer environment. We are projecting approximately 3% net inflation and gross productivity savings of approximately $350 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
