ConAgra Foods Reports Strong Second-Quarter EPS Driven by Excellent Consumer Foods Growth

ConAgra Foods, Inc., (NYSE: CAG) one of North America’s leading packaged food companies, today reported results for the fiscal 2010 second quarter ended Nov. 29, 2009. Diluted EPS from continuing operations was $0.55 compared with $0.38 a year ago. Current quarter results include $0.03 per diluted share of net benefit, and prior year amounts included $0.05 of net expense, from items impacting comparability. Diluted EPS from continuing operations was up 45% as reported and 21% on a comparable basis.

Items impacting comparability in the current year and prior year are summarized toward the end of this release.

Gary Rodkin, ConAgra Foods’ chief executive officer, commented, “Our strong performance this quarter reflects continued momentum in the Consumer Foods segment and gives us heightened confidence in our fiscal 2010 EPS outlook. Success with innovation and marketing drove significantly improved market shares and top-line progress in the Consumer Foods segment for the quarter, while a more favorable input cost environment and strong cost savings substantially contributed to profit growth. We are very pleased with our success this year and with the increased EPS outlook, and expect to continue demonstrating the earnings power of our company with consistent and sustainable growth.”

Consumer Foods Segment (64% of year-to-date sales)

Branded and non-branded food sold in retail and foodservice channels.

The Consumer Foods segment posted sales of $2,078 million and operating profit of $330 million for the quarter. Top-line progress was broad-based. Sales increased 3% as reported, which includes an approximate 1% negative impact from lower sales of Slim Jim products given that brand’s ongoing recovery. SKU rationalization negatively impacted sales growth by approximately 1%.

Unit volumes increased 2% as reported, which includes an approximate 1% negative impact from lower sales of Slim Jim products and 1% negative impact from SKU rationalization efforts.

• Large brands that posted strong sales growth include Banquet, Chef Boyardee, Healthy Choice, Hunt’s, Marie Callender’s, Orville Redenbacher’s, Peter Pan, Snack Pack, and several others.
• More brand details can be found in the Q&A document accompanying this release.

Operating profit of $330 million was 31% ahead of last year’s $251 million;this significant growth occurred even with $24 million of increased marketing investment. The year-over-year profit improvement was due to a more favorable input cost environment, strong productivity savings, and good sales results. The company expects continued year-over-year operating profit growth for this segment for the rest of the fiscal year. The company estimates that Consumer Foods profitability was negatively impacted by approximately $7 million due to lower Slim Jim volumes and higher Slim Jim production costs in the fiscal second quarter.

Commercial Foods Segment (36% of year-to-date sales)

Specialty potato, dehydrated vegetable, seasonings, blends, flavors, and milled grain products sold to foodservice and commercial channels worldwide.

Sales for the Commercial Foodssegment were $1,095 million, 11% below last year’s $1,235 million;approximately $110 million of the sales decline was due to lower flour milling sales, which reflect the pass-through impact of lower underlying wheat costs. Segment operating profit was $160 million, 1% above last year’s $158 million. Lamb Weston profits improved, reflecting the positive impacts of higher prices necessitated by increased input costs, as well as plant efficiencies and a refinement to its product cost allocation process;these were partially offset by the negative impact on sales and volume of difficult food service industry conditions. Flour milling profitability increased due to mill efficiencies and favorable wheat market conditions. Profits for the rest of the segment were below year-ago amounts, reflecting continued difficult market conditions for key vegetable items.

Although the segment posted profit growth for the first half of the fiscal year largely due to higher-than-planned flour milling profits, on a full-year basis the company continues to expect the Commercial Foods segment to deliver operating profits in line with year-ago amounts due, in part, to expectations for continued softness in the food service industry.