TreeHouse Foods reported net sales growth of 3.3% and organic net sales growth of 4% for the fourth quarter of 2020, and it expects further gains ahead following its acquisition of popular U.S. pasta brands under Ebro’s Riviana Foods.
That deal completed in December and is on-track to deliver $25 to $30 million in adjusted EBITDA from continuing operations and $0.20 to $0.30 in adjusted earnings per diluted share from continuing operations in 2021, the company said. Steve Oakland, CEO and president of Oak Brook, Ill.-based TreeHouse, spoke on a CEO panel last week about the state of private label, mentioning that the pasta business has been very strong for the company, up as high as 50% in sales compared with the year before.
The quarterly report also comes on the heels of a rumored investor wanting TreeHouse to explore a sale of the company. An article in Crain’s Chicago Business said activist investor Jana Partners has requested that the company ready a strategic review to look into a possible sale, and that the news of a sale caused the stock to rise 23%.
Jana Partners has filed a 13D filing and nominated three directors for election to the board of directors. TreeHouse released the following statement in response:
"TreeHouse has held multiple discussions with Jana in the spirit of maintaining constructive dialogue. During those conversations, Jana expressed strong support for the actions TreeHouse has taken to drive growth and profitability and enhance stockholder value. In particular, Jana has highlighted our strong position as a leader in private label, our progress in driving improved operating performance and cash flow, and the value creation opportunity that our acquisition of Riviana represents."
The statement continued, "TreeHouse is open to constructive input from all stockholders. The Board's Nominating and Corporate Governance Committee will review JANA's nominees in accordance with its process."
As for the fourth quarter report, Oakland seemed pleased with the results and he noted the importance of its private brands. “As we move into 2021, we look to capitalize on our leading portfolio of private label foods and beverages and build upon our successes from 2020 to drive greater value for all of our stakeholders,” he said. "Our intense focus on the customer and excellent service continue to be of the utmost importance in 2021. Although uncertainties around COVID-19 persist and continue to affect our business, I remain confident in the private label opportunity and in our ability to capitalize on those opportunities across our portfolio to effectively drive value going forward."
In the fourth quarter, TreeHouse reached $1.18 billion in net sales, and gross profit as a percentage of net sales was 19.4%. Total operating expenses as a percentage of net sales were 14.8% in the fourth quarter of 2020 compared with 17% in the fourth quarter of 2019.
Looking specifically at its two-division structure of Snack & Beverages and Meal Preparation, the former saw a net sales increase of $17.4 million or 3.9%, year over year, and the meals unit increased $21.4 million or 3.1%.
TreeHouse ackowledged that there have been some challenges in the food and beverage industry from significant inflation across several agricultural commodities like oils (coconut, soybean and palm), wheat and oats, and TreeHouse has put cost-saving measures in place to offset the impact of inflation.
"The progress we've made at TreeHouse over the last several years against our strategic pillars has strengthened our business, improved our efficiency and profitability,” Oakland said. “Our reorganization early last year to a two-division structure — Snacking & Beverages and Meal Preparation — enabled each of our businesses to focus on their unique strategies and tactics that would best position them for success — delivering for our customers and keeping our communities nourished. This differentiated us from our competition as we serviced increased food-at-home demand this past year."