Omaha, NB - ConAgra, Inc. reported results for fiscal year 1998's fourth quarter and full year ended May 31, 1998, and said the company expects earnings growth in fiscal year 1999, assuming recovery in the protein industry.
Fiscal 1998 diluted earnings per share increased 1.5% to $1.36 from $1.34 in fiscal 1997, excluding a required accounting change in fiscal 1998's third quarter. Fiscal 1998 fourth quarter diluted earnings per share decreased 12% to 36 cents from 41 cents in fiscal 1997's fourth quarter.
Following 13% earnings per share growth in fiscal 1998's first half, ConAgra's February 13, 1998 announcement said the company expected fiscal 1998 second half earnings per share would be flat to down moderately as excess supply and lower Asian export demand depressed prices and margins in the meat and poultry industry. Fiscal 1998 second half diluted earnings per share decreased 8%, excluding the accounting change.
Bruce Rohde, ConAgra's president and chief executive officer, commented, “Most of our businesses performed very well in fiscal 1998. Our Grocery & Diversified Products and Food Inputs & Ingredients industry segments both enjoyed double-digit operating profit growth, as did our branded processed meats business in the Refrigerated Foods segment. Moreover, all three beat their annual profit plans.”
Mr. Rohde continued, “In our Refrigerated Foods segment we could not change the protein industry's fundamental problems caused by abnormally high supply growth and decelerating Asian export demand. But we could have mitigated some of the earnings damage by managing better. We have moved aggressively to strengthen leadership and improve performance to make our fresh meat and poultry businesses as good as they can be.”
ConAgra expects continued earnings growth for 1999 in its Grocery & Diversified Products and Food Inputs & Ingredients segments and the branded processed meats business of the Refrigerated Foods segment. Assuming recovery in the protein industry's domestic and export markets, the company anticipates earnings growth in fiscal 1999, with results improving as the year progresses.
Mr. Rohde added, “Adjusted for business dispositions and commodity price levels, our top line grew modestly in fiscal 1998, though a number of businesses achieved healthy sales growth and our branded products businesses finished the year with good volume momentum. Increasing profitable top line growth via internal initiatives and acquisitions is a top strategic priority. Two days ago we announced a series of internal leadership initiatives aimed at growth. And our acquisition pace has quickened with a series of attractive additions and our agreement for GoodMark Foods to merge with ConAgra.”
In ConAgra's Grocery & Diversified Products industry segment, operating profit increased 12.5% to $913.2 million in fiscal 1998 from $811.5 million in fiscal 1997. Sales increased 5.4% to $5.62 billion from $5.33 billion. In fiscal 1998's fourth quarter, segment operating profit increased 29%, and sales increased 16% versus fiscal 1997's fourth quarter.
ConAgra Frozen Foods increased fourth quarter and year unit volumes and boosted operating profit substantially in both periods. The Lamb-Weston potato products business continued to perform well and contributed meaningfully to the segment's fourth quarter and year earnings growth.
In shelf-stable products, a fourth quarter volume and earnings surge lifted the Hunt-Wesson companies to full year volume and earnings growth, while Golden Valley achieved major volume and earnings growth in both periods. Seafood enjoyed strong earnings growth in both periods.
In ConAgra's Food Inputs & Ingredients industry segment, operating profit increased 18% to $407.3 million in fiscal 1998 from $345.1 million in fiscal 1997. The segment's fiscal 1998 fourth quarter operating profit increased 13%.
Segment sales decreased slightly to $5.91 billion in fiscal 1998 from $5.93 billion in fiscal 1997. Segment sales decreased 2% in fiscal 1998's fourth quarter. Adjusted for a fiscal 1998 first quarter business divestiture, acquisitions and lower commodity costs passed through as lower selling prices, segment sales increased 5% in the fourth quarter and 4% in the year.
United Agri Products, ConAgra's core crop inputs business, extended its record of strong and consistent growth with a double-digit sales increase and a substantial operating profit gain in fiscal 1998.
In the segment's ingredients sector, ConAgra's high-growth specialty food ingredients business registered strong operating profit gains in fiscal 1998's fourth quarter and full year. The commodity services business also achieved strong earnings growth in both periods.
Flour milling earnings were up in the fourth quarter and up significantly in the year. The international group's earnings were up in the fourth quarter and down in the year, while the oats and dry corn processing business improved results markedly in both periods. Grain merchandising earnings were up in the fourth quarter, but down substantially for the year due to weak global demand for US grain.
In ConAgra's Refrigerated Foods industry segment, operating profit decreased 40.1% to $231.1 million in fiscal 1998 from $385.6 million in fiscal 1997. The segment's fiscal 1998 fourth quarter operating profit decreased 69%.
Segment sales decreased 3.4% to $12.31 billion in fiscal 1998 from $12.74 billion in fiscal 1997. Fourth quarter segment sales decreased 3%. Adjusted for lower commodity selling prices and acquisitions, segment sales were up 1% in the fourth quarter and slightly for the year.
The branded processed meats business grew operating profit substantially in fiscal 1998's fourth quarter and year. Cheese business operating profit was down in both periods. In the Australia beef business, fourth quarter earnings were about even with the previous year's good results, and full year earnings were up substantially.
US fresh meat and poultry earnings plummeted in the fourth quarter and year for reasons described earlier. Poultry operating profit improved in the fourth quarter, but was down for the year. Pork earnings decreased in both periods. The earnings decline was especially severe in beef because beef processing and cattle feeding, which often naturally hedge each other's results, both suffered price and margin compression.
For ConAgra in total, before the accounting change, fiscal 1998 net income increased 2.1% to $628 million from $615 million. In fiscal 1998's third quarter, ConAgra implemented a new Financial Accounting Standards Board directive on accounting for certain business system reengineering costs. Including a cumulative one-time, non-cash provision of $14.8 million for this accounting change, fiscal 1998 net income was $613.2 million and diluted earnings per share were $1.33.
Fiscal 1998 fourth quarter net income decreased 9.5% to $168.7 million from $186.5 million the previous year.
ConAgra's fiscal 1998 sales decreased nearly 1% to $23.84 billion from $24.0 billion in fiscal 1998. Fiscal 1998 fourth quarter sales increased 1.5% to $5.882 billion from $5.795 billion in fiscal 1997's fourth quarter. Adjusted for lower commodity prices and businesses divested, and excluding acquisitions, ConAgra's sales increased 3% in fiscal 1998 and 4% in fiscal 1998's fourth quarter.
Fiscal 1998's fourth quarter and year consisted of 14 weeks and 53 weeks respectively, compared with 13 weeks and 52 weeks in fiscal 1997's fourth quarter and full year. Fiscal 1998's additional week benefited sales but did not affect earnings materially.
ConAgra's effective tax rate was 38.5% in fiscal 1998's fourth quarter and year versus 36.9% in fiscal 1997's fourth quarter and 39.6% for the full year. All earnings-per-share figures reflect ConAgra's two-for- one common stock split in fiscal 1998's second quarter.
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