* Cuts FY adj earnings forecast to $2.22-$2.25/share from
* Expects third-quarter adj. earnings of about $0.60/shr vs
* Sees delay in closing of Ardent Mills joint venture
* Shares fall as much as 8 pct
(Adds analysts, CEO comments, details, updates shares price)
By Siddharth Cavale
Feb 11 ConAgra Foods Inc cut its
full-year profit forecast for the second time, blaming weak
sales in its private-label business and a steeper-than-expected
fall in sales of its own brands such as Chef Boyardee pastas.
The company's shares fell 8 percent on Tuesday to their
lowest in more than a year.
ConAgra became the top U.S. producer of private-label foods
when it bought Ralcorp for $5 billion in January last year as
recession-hit shoppers grew accustomed to cheaper store-branded
ConAgra cut its fiscal 2014 profit forecast in September as
shoppers opted for lower-priced private labels over the
company's branded foods.
The company said on Tuesday its own private-label business
was taking longer-than-estimated to reach expected operating
profit levels, forcing it to cut prices to stem a fall in sales
"The (forecast) revision again seems to reflect weakness in
each and every part of CAG's business, including a
longer-than-expected timeframe to integrate Ralcorp properly,"
Barclays analyst Andrew Lazar wrote in a note.
ConAgra blamed the higher prices that Ralcorp had been
charging and the disruption caused by restructuring before the
acquisition for the weaker-than-expected results at its
"Our biggest issue is that the private brands operations are
taking longer to fix than we thought," Chief Executive Gary
Rodkin said on a conference call after forecasting a
weaker-than-expected profit for the third quarter ending
Analysts, including Lazar, pointed that even though ConAgra
spent more on advertising and promotions to beef up sales, the
return on investment (ROI) did not rise proportionately.
"Because U.S. consumers are so cash-strapped today, we do
not expect incremental promotional and/or advertising dollars
from food companies to generate the same ROI they once did," JP
Morgan analysts Ken Goldman said.
ConAgra said it expects a steeper fall in sales in the
consumer foods business as weak sales of key brands such as
Orville Redenbacher's and Healthy Choice offset a growth in
sales of smaller brands.
Sales volumes at the business, which contributes about 60
percent to revenue, are expected to fall 3-4 percent in the
second half of 2014. That is steeper than its prior forecast of
The company said it expects Ralcorp to contribute about 20
cents per share to full-year earnings, down from its prior
estimate of 25 cents.
ConAgra cut its full-year adjusted earnings forecast to
$2.22-$2.25 per share from $2.34-$2.38 per share. Analysts on
average are expecting earnings of $2.34 per share, according to
Thomson Reuters I/B/E/S.
The company forecast third-quarter adjusted earnings of
about 60 cents per share, below the analysts average estimate of
66 cents per share.
The Omaha, Nebraska-based company also said its Ardent Mills
joint venture would now close in the second quarter of 2014
instead of the first quarter, due to ongoing regulatory reviews.
The merger would join ConAgra with Horizon Milling LLC - a
joint operation between Cargill Inc and CHS Inc
that already is the largest flour miller in the United
The U.S. Justice Department's antitrust division was
investigating the merger that would result in Ardent Mills
controlling about a third of U.S. flour mill capacity.
Shares of ConAgra were down 6.8 percent at $28.93 in early
afternoon trading. They earlier hit a low of $28.60.
(Editing by Savio D'Souza)