Birds Eye Frozen
Pinnacle Foods (PF) operates through three segments—the Birds Eye Frozen segment, Duncan Hines Grocery segment, and Specialty Foods segment. In this part, we’ll discuss the segment’s performance in the fourth quarter. The Birds Eye Frozen segment’s sales rose by 8.3% to $343.8 million for the quarter—compared to $317.4 million in 4Q14. The growth of 4.7% from the base business and an advantage of 3.6% from the Gardein acquisition contributed to this rise. The base business performed well because of a higher volume or mix of 2.5% and higher net price realization of 2.2%.
The Birds Eye franchise, Mrs. Paul’s, and Van de Kamp’s seafood also had strong performances. However, it was partially balanced by lower sales of the segment’s Foundation Brand portfolio. The Birds Eye franchise growth was led by innovations launched in 2015. These were mainly the Birds Eye Flavor Full vegetables, Birds Eye Disney-themed side dishes for kids, Birds Eye Protein Blends side dishes, and premium-tier Birds Eye Voila! Varieties, respectively.
The operating income for this segment rose by 44% to $78.3 million in 4Q15—compared to $54.3 million in 4Q14. It rose 12.9% to $80.1 million excluding items impacting comparability. Strong net sales growth, higher net price realization, and productivity savings drove the increase. However, input cost inflation, the impact of the vacation policy benefit in the prior year, and higher consumer marketing partially compensated for the profit.
Duncan Hines Grocery
The net sales for this segment fell 3.1% to $295.8 million in this quarter—compared to $305.3 million in 4Q14. A higher net price realization of 2.0%, unfavorable foreign currency translation of 0.9%, and a lower volume or mix of 4.2% were responsible for the fall. A decline in sales for the company’s Canadian business, led by the unfavorable impact of foreign currency translation, also impacted the net sales. Category weakness caused Duncan Hines baking product sales to decline. However, it was partially offset by more sales from the segment’s Foundation Brands—mainly Armour canned meat and Nalley Chili products.
The operating profit rose ~33% to $68.3 million in the quarter—compared to $51.5 million in 4Q14. It increased by 0.5% to $68.8 million excluding items impacting comparability. Productivity savings, Wish-Bone synergies, and higher net price realization drove the increase. It was also offset by the lower volume, currency translation effect, input cost inflation, and vacation policy benefit in the prior year.
The net sales for this segment rose slightly by 0.3% to $82.9 million—compared to $82.6 million in 4Q14. A higher net price realization of 1.1% drove the slight increase. It was partially balanced by a lower volume or mix of 0.8%. Greater sales of the company’s foodservice business, compensated by lower net sales of snacks, drove this increase.
The operating profit also increased by ~22% to $9.2 million—compared to $7.5 million in 4Q14. It rose 0.5% to $9.1 million excluding items impacting comparability. It showed a modest increase in net sales and productivity savings. It was compensated by input cost inflation and the vacation policy benefit in the prior year.
Pinnacle’s peers like Tyson Foods (TSN), Hain Celestial (HAIN), and Mead Johnson (MJN) reported operating profit of $776 million, $88 million, and $196 million for the last quarter. The Guggenheim S&P 500 Pure Value ETF (RPV) and the PowerShares DWA Consumer Staples Momentum Portfolio (PSL) invest 4.7% in Tyson Foods.