Yahoo Finance Lancaster Colony Corp (LANC) Q3 2024 Earnings Call Transcript Highlights: Robust Growth and ...
Consolidated Net Sales: Increased by 1.4% to $471.4 million.
Gross Profit: Grew 10.9% to $104.5 million.
Operating Income: Rose 19.5% to $35.1 million.
Retail Segment Net Sales Growth: 0.3% increase, driven by volume gains.
Foodservice Segment Net Sales Growth: Increased by 2.6%.
Gross Margin: Expanded by 190 basis points to 22.2%.
Diluted Earnings Per Share (EPS): Increased by 15.7% to $1.03.
Net Cash from Operating Activities: $75.9 million, up $32.2 million from the previous year.
Capital Expenditures: Year-to-date total of $52 million, with a forecast of $65 million for fiscal 2024.
Quarterly Cash Dividend: $0.90 per share, a 6% increase from the previous year.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Record net sales and gross profit reported, with consolidated net sales increasing by 1.4% to $471.4 million and gross profit growing by 10.9% to $104.5 million.
Operating income increased by 19.5% to $35.1 million, driven by solid growth in underlying business performance.
Successful licensing program contributed to retail segment growth, with notable gains from Chick-fil-A sauces and dressings, Olive Garden dressings, and new Subway sandwich sauces and Texas Roadhouse steak sauces.
Foodservice segment saw a net sales growth of 2.6%, led by demand from national chain restaurant accounts and volume gains for branded foodservice products.
Strong financial position with a debt-free balance sheet and $164.8 million in cash, alongside a 6% increase in quarterly cash dividend, continuing a 61-year streak of annual dividend increases.
Negative Points
Challenges from exiting perimeter-of-the-store product lines, specifically Flatout and Angelic Bakehouse, which led to a $14.7 million reduction in operating income due to associated charges.
Impact of product line discontinuations also included a $2.6 million inventory write-down recorded in cost of goods sold.
Restructuring impairment charges of $12.1 million related to exits of Flatout and Angelic Bakehouse product lines.
Deflationary pricing in the Foodservice segment and promotional trade spending investments in the Retail segments reduced revenue, despite being funded through commodity input cost favorability.
Projected reduced Pricing Net of Commodities (PNOC) favorability in fiscal Q4 compared to Q3, with commodity deflation becoming less pronounced.
Q & A Highlights
Q: Can you provide an update on PNOC and commodity cost inflation going into Q4 and the balance of calendar year '24? A: (David A. Ciesinski - President, CEO & Director) PNOC was a significant contributor in Q3 and is expected to continue into Q4, although at a diminishing rate as we lap price increases and see commodities flatten out. (Thomas K. Pigott - CFO) In Q4, deflation is expected but not as pronounced as in Q3, impacting PNOC favorability.
Q: What does the pipeline look like for M&A, and how does the exit from perimeter bakery impact this? A: (David A. Ciesinski - President, CEO & Director) The decision to exit perimeter bakery was based on lack of scale and capabilities, focusing future efforts on core areas like dressings and sauces. (Thomas K. Pigott - CFO) M&A strategy is focused on core competencies in dressings and sauces, leveraging culinary expertise and manufacturing capabilities.
Q: How did commodity costs trend during the quarter, and what are the expectations moving forward? A: (Thomas K. Pigott - CFO) Commodity costs were down mid- to high single digits percentage-wise during the quarter. For Q4, less deflation is expected, and for fiscal '25, a flattish commodity cost profile is anticipated.
Q: Can you discuss the operational status and future plans for the Horse Cave facility? A: (David A. Ciesinski - President, CEO & Director) The Horse Cave facility is performing well, focusing on automation and efficiency. Future expansion plans are being considered to support growth, with potential for new sites to maximize utility and profit.
Q: What are the impacts of the current economic environment on foodservice traffic and consumer behavior? A: (David A. Ciesinski - President, CEO & Director) There is a modest slowdown in foodservice traffic across the board, attributed to higher interest rates and inflation affecting consumer decisions. Lancaster Colony's diverse portfolio allows adaptation, focusing on innovation and cost management to maintain performance.
Q: How are the newly launched Subway and Texas Roadhouse sauces performing, and what is the outlook for licensed brands? A: (David A. Ciesinski - President, CEO & Director) It's too early to assess the performance of Subway and Texas Roadhouse sauces as they are still building distribution. The company remains optimistic about the growth potential of all licensed brands, including Chick-fil-A and Olive Garden, by driving household penetration and expanding product assortments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
