Chicago - ConAgra Inc., the No. 2 U.S. food processor, said it earned $219 million in its fiscal second quarter, little changed from last year, as lower grain trade profits offset better fresh meat earnings.
Omaha, Neb.-based ConAgra, the maker of Healthy Choice foods, Orville Redenbacher popcorn, and dozens of other brands, said it expects an even stronger performance from its fresh meats unit in the next six months as profit margins improve.
ConAgra, the second largest food processor behind Philip Morris Cos. Inc.'s Kraft unit, reported earnings for its fiscal 1999 second quarter ended Nov. 29 of $219.0 million or 46 cents a diluted share, about even with earnings of $217.2 million or 46 cents in the year-ago quarter.
The profits were a penny higher than analysts' estimates of 45 cents, according to First Call which tracks this data.
Fiscal second quarter sales slipped 2 percent to $6.40 billion from $6.55 billion in the same period last year. Last year's results have been restated for acquisitions.
Shares of ConAgra were down 50 cents at $30.25 in midday New York Stock Exchange trading.
ConAgra said its refrigerated foods business, which includes fresh beef, pork and poultry products, cheese and dessert toppings, was beginning to show improvement after several weak quarters. Operating profit in the second quarter rose 46 percent after falling 29 percent in the first quarter.
In the food inputs and ingredients unit, which trades grain and distributes fertilizers and seeds, operating profits fell 16 percent due largely to a sharp drop in earnings from grain merchandising and commodity services. Global economic turmoil has curbed demand for U.S. crops, limiting ConAgra's grain trading profits.
“Refrigerated foods' second quarter upturn bolsters ConAgra's prospects for a strong second half of fiscal 1999,” Chairman Bruce Rohde said in a statement.
Analysts said a glut of fresh meat and slack export demand had slashed fiscal 1998 profits for ConAgra, which is the largest U.S. meat company in terms of sales. Profit margins were improving, however, as the lowest hog prices in decades cut raw material costs, the analysts said.
“There is reason to be somewhat optimistic,” said Patrick Schumann who follows ConAgra for Edward Jones in St. Louis.
“It looks like refrigerated foods is starting to turn the corner,” he said. “We're still seeing a glut in (meats), but it looks like we may have seen the worst of it. That is going to be significant for second-half earnings.”
Nomi Ghez, food industry analyst at Goldman Sachs, said weak performance in the refrigerated foods division in fiscal 1998 may have cost ConAgra as much as $180 million. The company now believes it can recoup about half of the 1998 losses in the next two quarters, Ghez said.
“I think they're showing the right progression,” Ghez said. “This company had three down quarters which were very disappointing, although last quarter was a bit better than expected. From now, we are set for very strong quarterly earnings growth.”
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