Food Business News - April 19, 2016 - (Page 38)

Compnay Profile Flowers focused on improved margins Executives assure analysts turnaround is coming n the face of an increasingly skeptical investment community, executives of Flowers Foods, Inc., Thomasville, Ga., remain confident in the company's outlook. On April 13, Allen L. Shiver, president and chief executive officer, and other Flowers executives offered an upbeat picture of the company's future in the wake of a difficult several months. "By combining prudent top-line growth with margin expansion, our goal is to accelerate growth of earnings and cash flow," Mr. Shiver said April 13 in a presentation at the New York Stock Exchange. "On that front in particular we have identified specific opportunities to reduce cost and improve our profitability." The second largest baking company in the United States, Flowers sales in 2015 totaled $3,778,505,000. The company's largest brands include Nature's Own, Wonder and Tastykake. In trading on the N.Y.S.E. in recent days, shares of Flowers have held in the $18 range. Shares were far less stable in mid-February when the company announced earnings well I 38 FOODBUSINESS NEWS ® beneath its own fairly recent guidance. A 52-week low of $15.64 reached on Feb. 12 represented about a 40% drop from the 52-week high. Adjusted for cash and stock dividends, it was the lowest price for Flowers shares since December 2012. In last week's presentation, R. Steve Kinsey, Flowers' executive vice-president and chief financial officer, attributed the earnings disappointment to a range of factors. "This shortfall was primarily due to lower-than-expected sales the past two years, costs associated with the acquisitions, higher net interest expense, carrying cost associated with our closed facilities and increased amortization as well as cost for developing our expansion markets," he said. With the lower-than-expected earnings, mostly attributable to factors that should not have been a particular surprise, securities analysts turned cautious. For instance, uncertainty over pricing prospects for the baking industry prompted Eric Katzman of Deutsche Bank in February to downgrade Flowers to a hold from a buy recommendation. At the time, Mr. Katzman said the decision was not an impulsive one. "We usually take a more contrarian view when packaged food stocks react negatively to a missed quarter, often seeing the market disintermediation as an opportunity," he said. "Despite our reluctance to lower our opinion in the face of a 20% stock dip today and weak performance over the last few months, we nevertheless feel compelled to do so. As most investors who have read our research the last few years are aware, we viewed U.S. fresh bread and roll category consolidation as a likely catalyst toward better pricing, mix and profitability. Between Mexico-based Grupo Bimbo, Flowers and Campbell Soup's Pepperidge Farm, the leaders control 50% of category share. Our work suggested this could result in better margins for all assuming more rational behavior around pricing and promotion along with reinvestment to grow the category vis-à-vis new higher end products." However promising the consolidation appeared, it has not translated into the improved results Mr. Katzman expected. In public, the top players "said the right things," but their actions have not always mirrored their words. While the environment appeared to be improving in 2015, conditions seriously worsened in the fourth quarter. Mr. Katzman characterized results as a "major disappointment" and prompted a "reset" on his part in how he views the company and the industry. "In retrospect, this period of mixed performance is best characterized when looking at the last three years, which includes essentially flat sales, EBIT and e.p.s.," he said. "Again, with hindsight 20-20, this is not indicative of a category that is acting better because of consolidation nor reflecting a company that is taking advantage of it. Looking more broadly at the U.S. packaged food group, we have harped on the idea that realistic financial targets are critical in this environment. It doesn't April 19, 2016

Table of Contents for the Digital Edition of Food Business News - April 19, 2016

Food Business News - April 19, 2016
Fresh, authentic a focus for Unilever
Clash over child nutrition programs may lie ahead
Dairy Business News - Dairy flavors grow ever more creative
Table of Contents
Web Contents
Editorial - Growth of organic category suggests still greater attention ahead
Monogram Foods acquires appetizer company
‘Premiumization’ opportunities abound
Preferred Popcorn picks up organic popcorn maker
Wal-Mart to transition to cage-free eggs by 2025
AdvancePierre Foods files for i.p.o.
Dr Pepper Snapple increases sports nutrition stake
Hormel Foods launches clean label effort
Identifying the X-factor in food startups
Food service operators betting big on buns
ConAgra Foods earnings reflect focus on execution
Mondelez to partner with e-commerce firm Alibaba
Modern Table planting the seeds of a trend
Market Insight - Dairy still under pressure
Company Profile - Flowers focused on improved margins
Flavor Trends - The next level for dressings, sauces and marinades
Ingredient Innovations - Fiber's global reach
Ingredient suppliers emphasize specialized fibers
Algae venture to invest in or buy food companies
New Food Products
Ingredient Market Trends - Large supplies will weigh on grain and oilseeds prices into next year
Ingredient Markets
Supplier Innovations and News
Ad Index
Food Business in the News

Food Business News - April 19, 2016