TreeHouse Foods raises guidance on strength of Q2 performance

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TreeHouse Foods raises guidance on strength of Q2 performance

By David Salazar - 08/06/2020

With sales boosted by consumer demand amid the pandemic, TreeHouse Foods managed a second-quarter showing that executives said exceeded their expectations. For the quarter ended June 30, the Oak Brook, Ill.-based company posted a 5-cent loss per share, compared with an 89-cent loss per share in the same period last year— a 45% increase. Adjusted earnings were 58 cents per share. 

"Our priority continues to be the health, safety and welfare of our employees, and we owe them our thanks as they've continued to demonstrate resilience and dedication, working tirelessly to fulfill increased demand and service our customers," said Steve Oakland, TreeHouse president and CEO. "I'm pleased with our strong performance in the second quarter, as we delivered bottom line results of 58 cents, which was above our expectations. Our business transformation and strategic reorganization to two divisions enabled us to increase production to meet higher demand and capture operational efficiencies."

Net sales for the quarter totaled roughly $1 billion, up 1.6% from the prior-year period. Organic net sales rose by 3.7% over the previous year’s Q2, which the company said was due to favorable volume and mix, excluding SKU rationalization, which managed to outpace carryover distribution losses and lower food-away-from-home demand. This growth was slightly offset by the sale of two in-store bakery facilities

Gross profit for the quarter was 18.4%, down slightly from Q2 of fiscal 2019. Overall, net loss from continuing operations was $2.6 million — a serious improvement of the $50.1 million net loss the company posted in the prior-year period — accompanied by a 13.1% increase in EBITDA, which totaled $119.2 million that the company chalked up to productivity gains and favorable channel mix, offset slightly by higher employee expenses. 

"Our operational and commercial teams continue to work well together to service our retail customers and meet the higher demand for food at home, which drove organic net sales growth of 3.7% in the second quarter,” said Bill Kelley, executive vice president and CFO. “Our conscious decision to keep our employees safe and healthy by limiting production at plants located in regions most heavily impacted by COVID-19 resulted in revenue for the quarter just below our guidance range. Solid productivity gains throughout our network of manufacturing and distribution facilities enabled us to deliver second quarter adjusted gross profit1 of 20.1%, 120 basis points higher than last year. I commend our team on an outstanding performance in a difficult time."

TreeHouse’s snacking and beverage segment saw revenue increased to $6.4 million in the quarter, a 1.7% increase over the prior-year Q2 that the company attributed to favorable volume and mix from increased retail demand throughout the COVID-19 pandemic. Though this was partially offset by unfavorable pricing related to the carryover impact of prior-year adjustments and unfavorable foreign currency, the segment managed to see 7% year-over-year organic net sales. 

The company’s meal preparation segment increased 1.6%, also attributed to favorable volume and mix from increased retail demand. 

The results led the company to raise its guidance for the full year. 

"We are encouraged by both the strength of our operations during this period of elevated demand and the commitment of our employees to supporting our healthy workplace protocols and processes," Oakland said. "The work we performed related to our restructuring and reorganization activities has enabled us to flourish during this uncertain time. We remain confident in both our near-term and the longer-term opportunity for private label. Our outlook for the balance of the year assumes revenue will remain strong and takes into account higher costs to implement and maintain heightened COVID-19 safety measures."

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