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With a broth recall largely behind TreeHouse Foods, the US private-label supplier has turned its attention to margin expansion and boosting volumes.
In the near term, pressure on volumes is expected to continue in the new financial year as CEO Steve Oakland guided to a conservative outlook for sales and EBITDA amid the multiple challenges affecting the food industry in general.
Oakland said, however, those challenges will eventually wither as he reported a 2.3% decline in annual sales last week and a negative volume/mix for fiscal 2024 of 0.1%.
“We’re not satisfied with our 2024 results. We know this business is capable of more than that,” the CEO told analysts in a post-results discussion outlining the difficulties TreeHouse Foods and the wider food industry faces.
“You’ve got this environment of high inflation, you’ve got the GLP-1 question, you’ve got the consumer pressure questions,” he said.
“The GLP-1 question is going to flush itself out over the next year or two. A lot of these trends, the food costs for commodities, will settle. We can’t have a more uncertain environment today with tariffs and all the things that are going on around us.
“So I think we just should build ... and position the business for normalcy – and normalcy will happen.”
Oakland said production at TreeHouse Foods’ Brantford facility in Ontario, Canada, resumed shipments in “recent weeks”. The frozen waffle products plant was shutdown after a voluntary product recall in October linked to the potential presence of listeria.
The sales outlook for the new year was set at $3.34-3.4bn, which represents a 1% decline year on year to an increase of 1% from 2024. But both volume and volume/mix are predicted to fall 1% with a positive commodity-linked pricing impact of 1%.
CFO Pat O’Donnell added TreeHouse Foods is likely to “continue to see a challenging macro food environment and slowing as it relates to our top-line outlook”.
As adjusted EBITDA was positioned at $345-375m, versus $337.4m for 2024, O’Donnell said the company had “made margin management a priority in the coming year and are executing on this strategy as we speak”.
The adjusted EBITDA margin dipped to 10% last year from 10.7% in the previous 12 months.
Margin expansion
O’Donnell suggested TreeHouse Foods will turn away from less profitable business in an effort to drive volumes and margin, while Oakland said promotional activity will also be stepped up.
“Throughout the year, you’ll start to see us make choices on bids that we participate in where we may not want to run down the structural margin in a category and bid too low, and other parts of the business that are complex and are within the tail of what we serve that don’t make sense for us,” the CFO explained.