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ConAgra Profit Up 5 Percent on Trading Operation Results

June 26, 2008

By Joe Ruff, Omaha World-Herald, Neb.

Jun. 26–ConAgra Foods today reported a 5 percent increase in net income for its fourth quarter, with about half its earnings from commodity trading and merchandising operations that it sold.

Net income for the three months ended May 25 was $201.3 million, or 41 cents a share, compared with $192 million, or 39 cents a share, in the same period the year before. Sales were up 15.5 percent to $3.07 billion from $2.66 billion in the fourth quarter last year.

Twenty-three cents a share in the latest quarter came from discontinued operations and were led by results from trading and merchandising, which ConAgra sold this month for $2.8 billion. Also included were results from the Knott’s Berry Farm brand, which was sold May 13 for $55 million.

Omaha-based ConAgra, maker of store brands including Orville Redenbacher’s popcorn, Healthy Choice frozen meals and Hunt’s tomato sauces, said volume was flat in its consumer foods division but overall sales improved because of higher prices.

Private-label products are challenging some sales of Reddi-wip dessert topping, Pam cooking spray and low-fat, low-cholesterol Egg Beaters, company officials said.

ConAgra’s shares dropped 59 cents to $21.56 in midday trading on the New York Stock Exchange. Over the past year, ConAgra’s stock has traded as high as $27.45 and as low as $20.81.

ConAgra increased its prices an average of 5 percent in late March and eliminated some trade promotions to combat inflation. Those changes hurt volume but should help earnings in coming quarters, Chief Executive Gary Rodkin said. More price increases were expected as well, he said.

Sales also grew in the international foods segment and in food and ingredients, which serves restaurants and other food-service outlets.

For the year, ConAgra said net income was $930.6 million, up 21.7 percent from $764.6 million. Per-share earnings were $1.91 a share, up from $1.51 in fiscal 2007. ConAgra had $11.6 billion in revenue, up 10.2 percent from $10.5 billion the year before.

Earnings for fiscal 2009 should be $1.56 to $1.59 per share, excluding items impacting comparability, ConAgra said. First-quarter earnings should range from 26 cents to 28 cents a share.

The earnings forecast for fiscal 2009 did not meet analysts’ expectations of about $1.61 a share, said Matt Arnold, an analyst with St. Louis-based Edward Jones.

“The core branded foods is showing some poor results,” Arnold said.

Rodkin said selling ConAgra’s trading unit would allow the company to focus more on its consumer foods division, which makes up 59 percent of sales. Commodity trading also is volatile and its earnings unpredictable, he said. Sales were strong in fiscal 2008 largely because of a surge in prices for grain and other raw ingredients.

Proceeds from selling the trading division would be used to help boost earnings per share, ConAgra officials said. The company planned to buy back about $900 million of its stock during the first half of fiscal 2009, on top of $100 million in share buybacks in fourth quarter 2008.

–Contact the writer: 444-1117, joe.ruff@owh.com

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