Del Monte 2nd-quarter net disappoints
By Brad Dorfman
CHICAGO (Reuters) - Del Monte Foods Co <DLM.N> posted a lower-than-expected quarterly profit on Thursday and cut its full-year earnings forecast because of soaring costs for ingredients like wheat, corn and fish.
The news sent Del Monte's stock down more than 6 percent.
The maker of Del Monte canned vegetables, Meow Mix cat food and StarKist tuna said profit was $25.9 million, or 13 cents a share, in the second quarter, ended October 28, compared with $23.2 million, or 11 cents a share, a year earlier.
Excluding restructuring costs, earnings were 14 cents a share, falling short of the average analyst estimate of 17 cents a share, according to Reuters Estimates.
Like all food companies, Del Monte has been hit by rising commodity costs and has tried to offset those costs with price increases and cost-cutting measures.
"A lot of their brands, particularly on the consumer products side, are tied too closely to commodity prices," An Gilpin, an analyst at Morningstar, said.
Del Monte is trying to shift to more value-added food products that can command a higher price and keep consumers from moving to lower-priced private label brands, Gilpin said.
"I think that's an evolution that is happening right now -- unfortunately, it is not happening fast enough," she said.
One commodity hurting the company is fish. The cost of skipjack tuna was up more than 65 percent during the quarter compared with a year earlier and fish costs make up half of the operating cost in the company's seafood business, according to Del Monte.
"The higher price of skipjack is not expected to be offset," Richard Wolford, chairman and chief executive officer, said during a conference call with analysts.
Sales rose 5 percent to $938.1 million in the second quarter.
Del Monte said it now expects earnings of 64 cents to 68 cents a share for the year, down from its previous forecast of 70 cents to 74 cents a share.
Del Monte shares were down 57 cents at $9.15 at midday on the New York Stock exchange. The stock is down more than 17 percent this year, compared with a 3 percent increase for the Standard & Poor's U.S. packaged foods index <.15GSPFOOD>.
(Reporting by Brad Dorfman; Editing by Dave Zimmerman and Brian Moss)