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B&G Foods, Inc. BGS reported mixed first-quarter fiscal 2022 numbers, wherein the bottom line missed the Zacks Consensus Estimate and declined year over year. However, the top line increased year over year and surpassed the consensus mark.
The company benefited from higher demand and pricing. However, increased input cost inflation, mainly due to the Ukraine war, and continued supply-chain headwinds weighed on the gross margin. Management’s recent pricing initiatives are likely to recover escalated costs in the second half of fiscal 2022.
B&G Foods concluded the closure and divestiture of its Portland, ME manufacturing facility in the first quarter of 2022. Also, in a separate press release, management announced that it acquired the frozen vegetable manufacturing operations of Growers Express, LLC. Growers Express produces, packages, manufactures and sells frozen vegetable products, mainly Green Giant Riced Veggies and Green Giant Veggie Spirals. This move is likely to enhance the operations of the Green Giant brand.
B&G Foods, Inc. Price, Consensus and EPS Surprise
B&G Foods, Inc. price-consensus-eps-surprise-chart | B&G Foods, Inc. Quote
Quarterly Highlights
The company posted adjusted earnings of 34 cents per share, which missed the Zacks Consensus Estimate of 39 cents. The bottom line tumbled 34.6% from the year-ago quarter’s adjusted earnings of 52 cents per share. The downside was a result of industry-wide inflation in input costs and supply-chain bottlenecks. This was somewhat compensated by list price elevation, lower trade spending and a net benefit in the quarter related to gains from the sale of the Portland, ME manufacturing facility (partly negated by costs associated with the closure of the facility and the shift in manufacturing operations).
Net sales of $532.4 million increased 5.4% year over year, mainly due to pricing efforts and a favorable product mix. This was somewhat offset by soft volumes stemming from supply-chain hurdles due to the Omicron variant and price elasticity. The top line came ahead of the Zacks Consensus Estimate of $510 million.
Base business net sales advanced 5.6% to $532.2 million due to an increase in net pricing and a favorable product mix. Also, a positive impact of foreign currency rates was an upside. These were partially countered by a fall in the unit volume.
Net sales of Crisco, Back to Nature, Clabber Girl, Ortega, Green Giant (including Le Sueur), Cream of Wheat and Maple Grove Farms rose 36.2%, 32.1%, 20.5%, 9.3%, 2.4%, 15.5% and 6%, respectively. Net sales of spices & seasonings declined by 14.7% due to tough year-over-year comparisons and supply-chain woes. Base net sales of all other brands in the aggregate jumped 3.7%.
The adjusted gross profit came in at $101.3 million compared with $117.8 million in the year-ago period. The adjusted gross margin of 19% contracted by 430 basis points (bps). The gross margin was hurt by greater-than-anticipated input cost inflation. This includes escalated raw materials and transportation expenses.
The company expects the input cost inflation to have a considerably industry-wide effect in the remainder of fiscal 2022. BGS is on track to mitigate the impact of inflation by undertaking cost-saving initiatives, increasing list prices and locking in prices via short-term supply contracts and advance commodities purchase agreements. That being said, these may not fully offset additional cost headwinds in the remaining part of fiscal 2022.
SG&A expenses declined by 7% to $46.8 million. As a percentage of net sales, SG&A expenses improved by 1.2 percentage points to 8.8%. Adjusted EBITDA decreased by 16.2% to $77.9 million due to the same factors impacting adjusted earnings per share (EPS). The adjusted EBITDA margin contracted by 380 bps to 14.6%.