Getting strong performances from its Birds Eye frozen vegetables brand, as well from Voila! skillet meals, Hungry-Man entrees, Aunt Jemima breakfasts and several non-frozen lines, Pinnacle Foods saw retail net sales advance by 6.9% to reach almost $2.25 billion in North America during 2014.
The Parsippany, New Jersey, USA-headquartered company reported that consolidated net sales during the fiscal year increased 5.2% to $2.59 billion, reflecting a 6.2% benefit from acquisitions and a 0.3% increase from higher volume/mix. This was partially offset by a lower net price realization of 1.1% and an unfavorable foreign currency translation of 0.2%.
“We again outpaced the performance in our categories, growing our composite share for the year – something we have done in four of the last five years,” said CEO Bob Gamgort during a conference call with financial analysts on February 24.
Full-year net earnings topped $248 million, up by a whopping 178% over 2013. A $163 million termination fee paid by Tyson Foods following its acquisition of Hillshire Brands, which was to have merged with Pinnacle, drove this significantly.
Fourth Quarter Consolidated Results
Net sales in the fourth quarter of 2014 decreased 0.6% to $705.3 million, compared to net sales of $709.3 million in the fourth quarter of 2013. This result reflected a 1.0% benefit from Gardein Protein International Inc. (which it acquired last November from Yves Potvin for $153.8 million) and a 0.2% increase from higher net price realization, more than offset by lower volume/mix of 1.6%, driven by the expected decline in the specialty foods segment, and an unfavorable foreign currency translation of 0.2%.
North America retail net sales increased 0.9% to $622.7 million in the fourth quarter, compared to net sales of $617.2 million in the year-ago period. This performance reflected a 1.1% benefit from the Gardein acquisition and a 0.2% increase from higher net price realization, partially offset by lower volume/mix of 0.2% and an unfavorable foreign currency translation of 0.2%.
Gross profit decreased 4.6% to $188.4 million, or 26.7% of net sales, in the fourth quarter of 2014, compared to gross profit of $197.6 million, or 27.9% of net sales, in the prior-year period. Excluding items affecting comparability, gross profit advanced 1.6% to $207.5 million and, as a percentage of net sales, gross profit expanded by approximately 60 basis points to 29.4%. This performance reflected the benefits of continued strong productivity, slightly higher net price realization and the impact of $2.7 million from the company’s vacation policy change, partially offset by higher-than-anticipated inflation associated with trucking and rail capacity constraints.
EBIT declined to $93.6 million in the fourth quarter of 2014, compared to $116.5 million in the fourth quarter of 2013.
Results by Segment
Net sales for the Birds Eye frozen segment increased 4.9% to $317.4 million in the fourth quarter of 2014, compared to $302.4 million in the prior-year period. This reflected a 2.3% benefit from the Gardein acquisition, higher volume/mix of 2.0%, and higher net price realization of 0.6%. Growth in the Birds Eye frozen vegetable and Voila! skillet meal businesses, reflecting continued distribution expansion and strong growth of Voila! family size varieties, along with strength of Hungry-Man frozen entrees, driven by success of the new Hungry-Man Selects line. This was partially offset by lower sales of Mrs. Paul’s and Van de Kamp’s frozen prepared seafood.
EBIT for the Birds Eye frozen segment declined approximately 20% to $54.3 million in the fourth quarter, compared to $68.2 million in fourth quarter of 2013. Excluding items affecting comparability, EBIT increased 2.8% to $71.0 million, driven by the growth in net sales, productivity savings and the vacation policy change, partially offset by higher logistics costs and packaging investments.
Looking ahead, Pinnacle has great expectations for future growth in Gardein product sales. The range of frozen meat substitute offerings, well known to consumers who shop in natural and health food stores, is now gaining greater access into the freezer sections of mainstream supermarket outlets through the connection of Birds Eye brand distribution channels.
