* Q3 EPS 30 cents vs Wall St view of 22 cents
* Sees FY09 EPS of $0.64-$0.68, Wall St view 59 cents
* Shares up 13 percent (Adds analyst’s comments,paragraphs 5-9)
By Brad Dorfman
CHICAGO, Feb 25 (Reuters) - Del Monte Foods DLM.N posted a higher-than-expected quarterly profit and raised its full-year forecast, helped by price increases for products like pet food, sending its shares up 13 percent.
The company, which makes Meow Mix and other pet foods and Del Monte canned fruits and vegetables, is one of many food makers that has benefited from consumers eating more at home to save money. Del Monte also set price increases in recent months to offset commodity costs that soared last year.
Despite the tough economy, consumers also are still spending on their pets, buying “indulgent” treats like Pup-Peroni dog snacks, Chief Executive Richard Wolford said during a conference call with analysts after the company reported results on Wednesday.
Pet food sales rose 15.1 percent, helped by new Meow Mix products and price increases, though the price increases did push shipment volume down slightly.
The basic pet food sector is one where Del Monte is more likely to be able to hold onto its price increases. Consumers are likely skittish about trading down to private label competitors because of concerns about product contamination, Morningstar analyst Ann Gilpin said.
“I don’t think anybody wants to buy private label dog food, just because there were so many issues with recalls,” she said.
Pet food manufacturers recalled more than 150 brands of dog and cat food across the nation in 2007, following reports of thousands of animals suffering illnesses after eating tainted products.
The company could be vulnerable to private-label competitors on other products, especially its namesake canned fruits and vegetables, which compete in a sector where store brands have a large presence.
“Price increases will only get you so far, especially in this environment, because Del Monte participates in some more commoditized markets,” Gilpin said.”
Del Monte profit rose to $60.5 million, or 30 cents a share, in the third quarter ended Jan. 25 from $53.3 million, or 26 cents a share, a year earlier. Analysts on average forecast earnings of 22 cents a share, according to Reuters Estimates.
The company said it now expects full-year earnings of 64 cents to 68 cents a share, up from its previous forecast of the middle of a range of 58 cents to 62 cents. Analysts on average forecast 59 cents a share, according to Reuters Estimates.
Sales rose 8.4 percent to $942.3 million. Analysts on average forecast $953.3 million.
Consumer products sales were up 3.4 percent, though price increases and promotional activity by competitors in fruits and vegetables also pressured shipment volume of some products.
While Del Monte has seen diesel, corn and soymeal costs retreat, the company is still seeing increases in the tin used in its cans, as well as meat used in pet food. The company also warned that its fruit and tomato costs could be higher in 2010 due to drought conditions in California.
Del Monte shares were up 90 cents at $7.45 on Wednesday on the New York Stock Exchange. (Reporting by Brad Dorfman; Editing by Lisa Von Ahn, Dave Zimmerman, Leslie Gevirtz)