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REFILE-UPDATE 2-Campbell profit rises, as do U.S. soup sales
September 11, 2008 / 1:35 PM / 9 years ago

REFILE-UPDATE 2-Campbell profit rises, as do U.S. soup sales

4 Min Read

(Refiles to fix typographical error in fourth paragraph; adds company, analyst comments, byline. Updates share move) By Brad Dorfman

CHICAGO, Sept 11 (Reuters) - Campbell Soup Co (CPB.N) posted a better-than-expected quarterly profit as price increases and newer products such as lower sodium soups helped offset higher commodity costs.

The company said on Thursday that sales growth in the just started 2009 fiscal year should exceed its long-term expectations, with earnings up 5 percent to 7 percent, excluding unusual items.

Campbell shares were up over 1 percent at $38.06 at midday on Thursday on the New York Stock Exchange.

Campbell has introduced several new products in the past year to tap into U.S. consumers' desire to eat healthier food.

Its fall lineup includes new soups under the Select Harvest label that emphasize ingredients such as farm-grown vegetables and "wholesome grains."

U.S. soup sales rose 6 percent in the company's fourth quarter, excluding the impact of an extra week in the fiscal year. That follows on a 3 percent drop in U.S. soup sales in the previous quarter.

Chief Executive Douglas Conant told analysts on a conference call it was hard to say what part of the increase was due to consumers seeking lower-priced meal options, such as soup, due to a weak U.S. economy, rather than new products and other Campbell efforts to bolster the soup business.

"I think it's probably an even balance in where (the sales increase) is coming from," Edward Jones analyst Matt Arnold said. "It's a really good category to be in in terms of a value perspective"

Overall, profit was $89 million, or 24 cents a share, in the company's fiscal fourth quarter that ended Aug. 3, compared with $61 million, or 16 cents a share, a year earlier.

Excluding restructuring items, Campbell earned 26 cents a share. On that basis, analysts forecast 25 cents a share, according to Reuters Estimates.

Costs on the Rise

Sales rose 13 percent to $1.72 billion, although much of the increase was due to the extra week in the quarter and the benefit of the weak dollar, which boosts the dollar-value of sales overseas.

The fourth quarter tends to be the slowest quarter for Campbell, as fewer U.S. consumers eat soup during warm summer months.

Like most food companies, Campbell has been hit by rising costs for commodities such as wheat and energy, although those costs have eased in recently.

Such costs cut into Campbell's profit margins and the company plans to counter the trend with price increases and productivity improvements in 2009, Conant said.

The company expects costs for ingredients, packaging and energy to rise 9 percent to 10 percent in 2009, up from the 7 percent to 8 percent increase it saw in 2008.

More price increases for Campbell products are also working their way through the system and should be seen on store shelves in the first half of 2009, Conant said.

Gross margin fell to 39.6 percent in 2008 from 40.6 percent a year earlier, the company said.

"We're determined to do a better job protecting margins this year than we did last year," Conant said.

For 2009, Campbell expected sales to increase more than the company's 3 percent to 4 percent target, excluding divestitures and the extra week in 2008.

The company forecast an adjusted earnings increase of 5 percent to 7 percent from a base of $2.09 a share, a forecast that equals about $2.19 to $2.23 a share. Analysts on average forecast $2.23 a share, according to Reuters Estimates. (Editing by Steve Orlofsky and Andre Grenon)

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