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ConAgra Stock Sale Improves profitsThe Gain Came Despite a Slight Drop in Sales to $3.36 Billion From Last Year's $3.38 Billion.

Posted on: Thursday, 22 September 2005, 21:00 CDT

A gain from selling stock in a poultry processor and better operating results in many of its own businesses helped ConAgra Foods more than double its first-quarter earnings, the company said Wednesday.

Net income was $352.1 million, or 68 cents per share, in the three months that ended Aug. 28, compared with $134.7 million, or 26 cents a share, in the same period a year ago, ConAgra said.

Earnings included a net pretax gain of about $329 million from selling its remaining 15.4 million shares in Pilgrim's Pride Corp. ConAgra acquired the stock in the fall of 2003 when it sold its chicken operations to Pilgrim's Pride.

In part because of manufacturing and pricing problems with its packaged meats division, ConAgra had expected lower earnings in its first fiscal quarter compared with last year. Discounting one-time expenses and one-time gains, the company earned about 31 cents per share, compared with 28 cents a share in operating earnings last year. The gain came despite a slight drop in sales to $3.36 billion from last year's $3.38 billion.

Improvement came in packaged meats, ConAgra officials said. Overall, price increases, more efficient manufacturing, favorable market conditions and cost-management efforts helped increase operating profit in all three divisions: retail, food service and food ingredients, ConAgra said.

"We're marching in the right direction," said Chairman and Chief Executive Bruce Rohde, who will step down Oct. 1 after eight years at the helm and be replaced by former PepsiCo senior executive Gary Rodkin.

Still, some analysts noted that ConAgra's food ingredients unit produced the best results, largely due to variable market conditions, while sales fell nearly 4 percent in the company's core retail products.

ConAgra also benefited from a lower tax rate and food service profits that looked particularly good when compared with that division's high manufacturing costs of a year ago, analyst David Nelson of Credit Suisse First Boston said in a report.

"Not as pretty as it looks," Nelson wrote of the first quarter.

ConAgra has struggled as it transforms itself from an agriculture conglomerate to a branded foods company, with earnings of $1.23 per share in fiscal 2005 compared with $1.53 the year before.

ConAgra's stock rose 97 cents in trading Wednesday to close at $23.03 on the New York Stock Exchange. It had traded as low as $22.05 on Aug. 5.

ConAgra said its retail sales dropped 3.6 percent in the first quarter to $1.9 billion, with declines seen in Act II popcorn, Armour and Eckrich meats, Blue Bonnet and Parkay margarines, PAM cooking spray, Egg Beaters, Healthy Choice and Banquet brands.

Sales increased for Butterball, Chef Boyardee, Kid Cuisine and Marie Callender's frozen meals, La Choy, Manwich, Orville Redenbacher popcorn, Peter Pan peanut butter, Slim Jim, Snack Pack, Van Camp's and Wesson oil.

Operating profit in retail rose slightly to $210.7 million from last year's $209.8 million.

Source: Omaha World - Herald

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