TreeHouse Q3 Sales Rise, Net Loss Grows
Third quarter sales at TreeHouse Foods were up double-digits but the company reported a net loss as high labor costs and supply chain disruptions impacted its bottom line.
For the three months ended Sept. 30, total sales were $875 million, up 16.4% from the comparable quarter the previous year. Net loss from continuing operations for the quarter was $15.1 million, compared to $4.1 million for the same period of the previous year. Adjusted EBITDA from continuing operations was $76.6 million in the third quarter of 2022, compared to $85.8 million in the third quarter of 2021, a decrease of $9.2 million.
Net loss was $90.5 million in the third quarter of 2022 compared to net income of $6.7 million of income in the third quarter of 2021. The decrease is due to an expected loss on disposal of $73.8 million, an increase in professional fees associated with the divestiture of a significant portion of the Meal Preparation business, an increase in interest expense due to rising interest rates, and unfavorable foreign currency exchange rate impacts between the U.S. and Canadian dollar.
"In the third quarter, we delivered solid sequential improvement across both revenue and profitability, reflecting the progress we are making to mitigate the disruption resulting from the challenging macro environment," said Steve Oakland, president and CEO of TreeHouse. "I'm confident that our portfolio of private label snacking and beverage products is poised to benefit from increasing consumer demand for snacking and beverages as well as broader trends driving private label demand."
He said the divestiture of a significant portion of the company’s meal preparation assets positions TreeHouse well to execute its strategy: to capitalize on strong consumer demand trends in order to accelerate growth across higher-margin private label snacking and beverage categories while driving long-term shareholder value.
Patrick O’Donnell, TreeHouse’s interim chief financial officer and chief account officer, said completing the divestiture of the meal preparation business also allowed the company to reduce its debt by $500 million and strengthen its balance sheet.
"We continued to improve execution and profitability in a challenging environment, and we expect this momentum to build in the fourth quarter as we reach our seasonal peaks, capture further impact of pricing to recover inflation and deliver on our cost savings initiatives,” he said.
Looking toward the fourth quarter, the company expects net sales to grow between 22% to 24%, primarily driven by pricing. Adjusted EBITDA is expected to be between $105 to $120 million. Adjusted EBITDA margin is anticipated in the range of 10.5% to 12.0%, representing substantial sequential improvement from the 8.8% in the third quarter, driven by the impact of pricing actions taken to date, peak seasonality and cost savings initiatives.