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01/11 03:38
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several concerning factors: a decline in adjusted net income, reduced guidance for net sales and EBITDA, and ongoing challenges with tariffs and divestitures. The Q&A section highlights uncertainties, such as vague responses on financial specifics and challenges in tariff mitigation. While there are efforts to stabilize and improve in the back half, the overall sentiment remains cautious, with divestitures and debt reduction being the focus. These factors suggest a negative market reaction in the short term.
Net Sales $424.4 million, down 4.5% year-over-year. The decline was driven by lower volumes (3.2 percentage points), a decrease in net pricing and product mix (0.9 percentage points), and the negative impact of foreign currency (0.1 percentage points).
Adjusted EBITDA $58 million, down $5 million or 9.3% year-over-year. The decline was primarily due to higher true-up costs on last year's weak crop (corn and peas), higher trade spend from Easter timing, and the end of the Walmart rollback.
Specialty Business Unit Net Sales Decreased by 8% year-over-year, primarily due to lower Crisco oil pricing. However, segment adjusted EBITDA improved by 3% due to lower raw material costs for certain brands.
Frozen and Vegetables Business Unit Net Sales Down $2.6 million or 2.8% year-over-year. Segment adjusted EBITDA declined by $6.5 million due to higher true-up costs, trade spend, and Walmart rollback.
Gross Profit $87 million or 20.5% of net sales, compared to $92 million or 20.7% of net sales in the prior year. Adjusted gross profit was $89.1 million or 21% of net sales, compared to $93.2 million or 21% of net sales in the prior year. The decline was due to increased promotional trade spend and modest inflation in certain raw materials.
Net Cash from Operations $17.8 million, up from $11.3 million in the prior year. The increase was attributed to improved working capital management.
Net Debt Reduced to $1.957 billion at the end of Q2 2025, down from $2.022 billion in Q2 2024. The reduction was driven by divestiture proceeds and excess cash flow.
Adjusted Net Income $2.9 million or $0.04 per adjusted diluted share, down from $6.6 million or $0.08 per adjusted diluted share in the prior year. The decline was due to lower net sales and adjusted EBITDA.
Portfolio Reshaping: B&G Foods completed two key divestitures: Don Pepino and Sclafani brands (tomato processing business with $14 million annual net sales) and Le Sueur U.S. Canned peas ($36 million annual net sales). These divestitures aim to simplify the business, improve margins, and reduce leverage.
Cost Savings Initiatives: The company is on track to deliver $10 million in adjusted EBITDA growth in Q3 and Q4 through productivity in COGS, trade and market spending efficiencies, SG&A savings, and discretionary spending cuts.
Frozen Vegetables Business Turnaround: The U.S. frozen vegetables business is expected to turn profitable in the second half of 2025, with an $8-10 million increase in segment adjusted EBITDA due to favorable crop costs, foreign exchange benefits, and productivity improvements.
Debt Reduction: B&G Foods plans to reduce leverage to 6x within 12 months using divestiture proceeds and excess cash flow to repay or repurchase long-term debt.
Focus on Core Business: The company aims to improve base business net sales trends to a long-term objective of +1% and structure key platforms for future acquisition growth.
Divestiture Strategy: B&G Foods is committed to further divestitures to focus the portfolio, improve margins, and reduce leverage closer to 5x.
Frozen and Vegetables Business Unit: Higher true-up costs on last year's weak crop (corn and peas), higher trade spend from Easter timing, and the end of Walmart rollback negatively impacted adjusted EBITDA. These costs are expected to reverse in the second half.
Specialty Business Unit: Significant net sales declines (8%) primarily due to lower Crisco oil pricing year-over-year, though segment adjusted EBITDA improved slightly.
Divestitures: Recent divestitures (Don Pepino, Sclafani, and Le Sueur brands) reduced net sales and profit contributions, though aimed at portfolio simplification and debt reduction.
Tariffs and Trade Negotiations: Increased tariffs, particularly on garlic and onion sourced from China, cost $1.6 million in adjusted EBITDA during the quarter. Tariff exposure remains a risk, with potential mitigation through trade deals or alternative sourcing.
Input Cost Inflation: Elevated costs for Black Pepper, garlic, olive oil, tomatoes, core vegetables, and cans. Inflationary pressures are being monitored closely.
Foreign Exchange and Currency Risks: Negative foreign exchange impacts, particularly related to the Mexican peso, have moderated but remain a potential wildcard for the Green Giant business.
Debt and Leverage: High leverage ratio (close to 7x) with plans to reduce to 6x within 12 months through divestitures and cash flow improvements. Interest expense remains significant.
Economic Environment: Modestly softer economic environment impacting consumer spending patterns, reflected in revised fiscal year guidance.
Fiscal Year 2025 Outlook: The company expects the second half of fiscal year 2025 (Q3 and Q4) to show solid improvement compared to the first half, with flat to slightly positive net sales and year-over-year growth in adjusted EBITDA. The 53rd week is expected to contribute 2%-3% net sales growth in Q4. Excluding the 53rd week, base business net sales are projected to decline by approximately 1%-2% in the second half. Additional savings and productivity efforts are expected to deliver $10 million in adjusted EBITDA growth in Q3 and Q4, with an annual run rate of $15 million to $20 million. The U.S. frozen vegetables business is expected to turn profitable, with an $8 million to $10 million increase in segment adjusted EBITDA compared to last year. Tariffs are assumed to remain at current levels, with potential mitigation through trade negotiations or alternative sourcing. Targeted pricing strategies are planned to recover incremental tariffs.
Revised Fiscal Year 2025 Guidance: Net sales are expected to range between $1.83 billion and $1.88 billion. Adjusted EBITDA is projected to be between $273 million and $283 million. Adjusted earnings per share are expected to range from $0.50 to $0.60. The guidance reflects a modestly softer economic environment, stabilization of the top line, and relatively consistent input costs. Cost reduction plans are expected to produce $10 million in savings in the second half of the year. The guidance does not fully account for potential impacts of ongoing tariff negotiations or additional tariffs.
Debt Reduction and Leverage: The company aims to reduce its net leverage ratio from just under 7x to less than 6x within the next 12 months. This will be achieved through divestiture proceeds, improved adjusted EBITDA performance, and lower working capital needs. The long-term goal is to reduce leverage closer to 5x.
The selected topic was not discussed during the call.
The earnings call summary presents a mixed picture. Basic financial performance and market strategy show stability with expected EBITDA growth and leverage reduction. However, guidance is modestly softer, and there are concerns about divestitures and leverage targets. The Q&A highlights uncertainties in divestitures, inflation, and elasticity impacts, which temper optimism. Without strong catalysts like new partnerships or record revenues, the overall sentiment is neutral, suggesting minimal stock price movement.
The earnings call reveals several concerning factors: a decline in adjusted net income, reduced guidance for net sales and EBITDA, and ongoing challenges with tariffs and divestitures. The Q&A section highlights uncertainties, such as vague responses on financial specifics and challenges in tariff mitigation. While there are efforts to stabilize and improve in the back half, the overall sentiment remains cautious, with divestitures and debt reduction being the focus. These factors suggest a negative market reaction in the short term.
Despite efforts to reshape the portfolio, B&G Foods faces declining sales across multiple segments and a significant drop in EBITDA. The Q&A revealed uncertainty about tariffs and promotional strategies, and management's evasive responses raised concerns. While debt reduction and strong cash flow are positives, the overall sentiment is negative due to weak financial performance and lack of clear guidance.
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