Conagra said “higher-than-expected cost pressures” will continue to persist for the rest of the year, and plans to increase prices in order to mitigate their impact.
Updated at 8:42 am EST
Conagra Brands Inc (CAG) – Get Conagra Brands, Inc. Report shares slumped lower Thursday after the packaged food giant cut its full-year profit forecast amid surging input prices and freight costs.
Conagra said profits for the three months ending in February, the group’s fiscal third quarter, slipped 1.7% from last year to 58 cents per share, while revenues rose 4.7% to $2.9 billion.
While both tallies essential matched the Street consensus forecasts, Conagra said rising input costs, which it expects to last for at least the next six months, will likely clip around 100 basis points from its operating margins, with full year earnings now forecast to be around $2.35 per share, down 10 cents from the group’s prior estimate.
“We experienced higher-than-expected cost pressures as the third quarter progressed and expect those pressures to continue into the fourth quarter, particularly in certain frozen, refrigerated, and snacks businesses. In response, we have taken steps to implement additional inflation-driven pricing actions,” said CEO Sean Connolly.
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“We will begin to see the benefits of these actions in the first quarter of fiscal 2023,” he added. “Consumer demand has remained strong in the face of our pricing actions to date, but there will continue to be a lag between the timing of the incremental inflation and the benefits of our mitigating actions.”
ConAgra shares were marked 2.6% lower in pre-market trading immediately following the earnings release to indicate an opening bell price of $33.46 each.
The U.S. Department of Agriculture said late last month that so-called ‘food-at-home’ prices are expected to rise between 3% and 4% this year, an increase it said will “exceed historical averages and the inflation rate in 2021”.
Russia’s war on Ukraine is also affecting wheat exports from the region, while U.S. farmers are planning to plant more soybeans thanks in part to the high costs of the fertilizers needed to grow more corn and wheat, adding to upward price pressures for food manufactures such as Conagra.
