By Sony Kassam
Despite increased competition and an unfavorable pricing environment, TreeHouse Foods Inc. released fourth quarter results that outperformed Wall Street’s expectations Thursday.
The Oak Brook, Illinois-based provider of private label foods and beverages said net income rose 9.8 percent to $37.3 million, or 85 cents per diluted share, from $33.9 million, or 78 cents per share, in the year-ago quarter.
However, revenues slumped 4.2 percent to $865.4 million from $903.5 million a year ago.
Excluding unusual items, TreeHouse Foods said, adjusted earnings per share climbed to $1.08 from 99 cents per share in the year-ago quarter – landing 6 cents above the $1.02 analysts surveyed by Yahoo Finance had been expecting.
Sam K. Reed, the chairman, president and CEO of TreeHouse Foods, said in a company press release that 2016 “marks the beginning of an important journey for us, as we press forward with our strategic vision and relentlessly focus on tactical execution.”
On Feb. 1 of this year, TreeHouse Foods completed the acquisition of ConAgra’s Private Brands business for $2.7 billion. Headquartered in Omaha, Nebraska, ConAgra is an American packaged foods company that makes and sells products under assorted brand names.
As a result of the acquisition, the Illinois manufacturer of packaged foods for retail grocers and foodservice distribution channels said it will “intensely focus” on integrating the new operation.
From Thursday morning’s conference call, company officials forecast that the first quarter of 2016 will present some challenges because of the acquisition’s integration expenses and because the Private Brands business has lower profit margins than TreeHouse Foods.
However, TreeHouse Foods expects sales to double in 2016 to between $6.3 billion and $6.5 billion, which is on par with analysts’ average estimate of $6.43 billion for the upcoming full year.
“Nearly all the increase in revenue will come from having the Private Brands transaction,” said Dennis F. Riordan, executive vice president and chief financial officer, in the call.
Riordan further explained to analysts that 2016 “will be a bit of a hockey stick” for revenue since the later half of the year is expected to be better than the first half.
“There’s a lot of redundant integration related expenses, a lot of redundant management expenses as we start off and get things organized,” he said during the call, “and we’ll start to get into kind of a good sales cadence and a good operating cadence…but that’s pretty normal for this type of acquisition.”
For the full 2015 year, TreeHouse Foods had net income of $114.9 million, or $2.63 per diluted share, up 27.8 percent from $89.9 million, or $2.23 per share, in the previous year. Revenues jumped to $3.21 billion from $2.95 billion.
In New York Stock Exchange trading Thursday, TreeHouse Foods shares went up 29 cents to close at $79.59.