Conagra Brands Inc. on Thursday lowered its full-year profit forecast despite several rounds of price increases, as an overstretched supply chain squeezed the packaged food maker’s margins.
Shares of Chicago-based Conagra fell about 2.5% in premarket trading after reporting a lower quarterly operating margin due to higher-than-expected costs in its frozen food divisions and snacks.
The operations of packaged food companies like Conagra have been under pressure since the pandemic, due to a tight supply chain that is driving up transportation costs, while the resurgence in demand for basic commodities has led to an increase ingredient costs such as corn, wheat, protein and edible oils.
“We experienced higher than expected cost pressures during the third quarter and expect these pressures to continue into the fourth quarter,” Chief Executive Sean Connolly said.
Cake mix maker Duncan Hines expects headline inflation to be around 16% for the year, higher than its previous view of around 14%
Similar to rivals Kellogg and Kraft Heinz, Conagra has implemented several rounds of pricing actions in recent months with little to no consumer response, but the company does not expect to fully offset the pressures on costs in fiscal year 2022 due to the delay in implementing the price increases.
He now expects adjusted earnings to be around $2.35 per share, down from around $2.50 he had forecast earlier.
Conagra was still able to exceed third quarter sales estimates and increase its base annual sales forecast thanks to higher prices coupled with sustained demand.
Net sales rose 5.1% better than expected to $2.91 billion in the third quarter ended Feb. 27, while adjusted earnings of 58 cents per share were in line with market estimates.
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