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01/11 03:33
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Net Sales $439.3 million, a decrease of 4.7% year-over-year. Base business net sales (excluding divestitures) were down 2.7%. The decline was driven by lower volumes (290 basis points) and foreign exchange (less than 10 basis points), partially offset by an increase in net pricing and product mix (30 basis points).
Adjusted EBITDA $70.4 million, flat year-over-year on a reported basis but up excluding the impact of divestitures. The improvement was supported by a $10 million cost savings initiative and productivity efforts.
Cost of Goods Sold (COGS) Improved by 40 basis points as a percentage of net sales year-over-year due to productivity efforts.
Frozen & Vegetables Segment Adjusted EBITDA Increased by $3 million year-over-year due to favorable crop pack costs and productivity gains in the Mexico facility.
Spices & Seasonings Net Sales Increased by 2.1% year-over-year, driven by growth in fresh food and proteins, and strength in club and foodservice channels. However, segment adjusted EBITDA was impacted by tariffs.
Divestitures Impact The divestiture of Don Pepino, Sclafani, and Le Sieur U.S. brands removed approximately $10.3 million in net sales and $3.2 million in adjusted EBITDA from Q3 results.
Gross Profit $99 million or 22.5% of net sales, compared to $102.3 million or 22.2% of net sales in the prior year. Adjusted gross profit was $98.8 million or 22.5% of net sales.
Promotional Trade Spend Increased by approximately 110 basis points year-over-year, though sequentially favorable compared to earlier quarters.
Material, Labor, and Overhead Costs Improved by nearly 100 basis points as a percentage of gross sales year-over-year, with material, labor, and overhead costs favorable by 40 basis points as a percentage of net sales.
Tariffs Impact Reduced adjusted EBITDA by nearly $3.5 million in Q3, with $2.2 million of the impact on the Spices & Flavor Solutions business unit.
Selling, General, and Administrative (SG&A) Costs Decreased by $1.4 million or 3% year-over-year to $44.6 million, driven by reductions in consumer marketing, general and administrative expenses, and warehousing expenses.
Net Interest Expense Decreased by $4.9 million year-over-year to $37.3 million, driven by lower net debt and benefits of lower interest rates on variable rate debt.
Adjusted Net Income Increased to $11.7 million or $0.15 per adjusted diluted share, compared to $10.1 million or $0.13 per adjusted diluted share in the prior year.
Divestiture of Green Giant Canada: B&G Foods announced the divestiture of its Green Giant and Le Sieur frozen and shelf-stable product lines in Canada to Nortera Foods. This transaction is subject to Canadian regulatory approval and is expected to close in late Q4 2025 or Q1 2026. The divestiture aligns with the company's strategy to focus on higher-margin and stable portfolio segments.
Cost Savings Initiatives: The company implemented a $10 million cost savings initiative in the second half of 2025, with an annual run rate of $15 million to $20 million in savings. This includes productivity improvements in COGS, trade and market spending efficiencies, and SG&A savings.
Frozen & Vegetables Business Unit: The Frozen & Vegetables business unit achieved a $3 million improvement in segment adjusted EBITDA due to favorable crop pack costs and productivity gains in the Mexico facility.
Spices & Seasonings Business Unit: Net sales grew by 2.1% in Q3, driven by growth in fresh food and proteins, as well as strength in club and foodservice channels. However, segment adjusted EBITDA was impacted by tariffs, with pricing actions implemented to recover costs in Q4.
Portfolio Reshaping: B&G Foods is actively reshaping its portfolio by divesting non-core assets, including Don Pepino, Sclafani, Le Sieur U.S., and Green Giant Canada. This strategy aims to create a more focused, higher-margin, and stable portfolio, with adjusted EBITDA as a percentage of net sales approaching 20%.
Leverage Reduction: The company aims to reduce its consolidated leverage ratio to 6x by mid-2026 through divestitures, improved EBITDA performance, and lower working capital needs.
Market Conditions: Challenging consumer environment impacting sales and spending patterns, with modestly soft economic conditions persisting.
Competitive Pressures: Pressure from pricing initiatives to offset tariffs, which could lead to negative volume impacts and potential loss of market share.
Regulatory Hurdles: Pending Canadian regulatory approval for the divestiture of Green Giant Canada, which could delay or complicate the transaction.
Supply Chain Disruptions: Elevated costs in key raw materials such as black pepper, garlic, olive oil, tomatoes, core vegetables, and cans, along with ongoing trade and tariff negotiations.
Economic Uncertainties: Potential risks from a softer-than-expected holiday season, destocking, or inventory management by retail customers.
Strategic Execution Risks: Challenges in executing divestitures and restructuring efforts, including the transition services for divested brands and achieving targeted cost savings.
Fiscal Year 2025 Guidance: Net sales are expected to be between $1.82 billion and $1.84 billion. Adjusted EBITDA is projected to range from $273 million to $280 million. Adjusted earnings per share are anticipated to be between $0.50 and $0.58. The guidance reflects a modestly soft economic environment, stabilization of the top line, benefits from the 53rd week, and cost reduction plans.
Cost Savings Initiatives: The company expects to realize $10 million in cost savings in the second half of 2025, with an annual run rate of $15 million to $20 million. These savings will come from productivity improvements, trade and market spending efficiencies, SG&A savings, and discretionary spending cuts.
Divestitures and Portfolio Reshaping: The divestiture of the Canadian Green Giant business is expected to close in late Q4 2025 or Q1 2026. The company is also pursuing the divestiture of the U.S. Green Giant frozen business. These actions aim to create a more focused portfolio with higher margins, increased cash flow, and a lower leverage ratio closer to 5x.
Leverage Reduction: The company aims to reduce its consolidated leverage ratio to 6x within the next 9 months and closer to 5x through divestitures, improved EBITDA performance, and lower working capital needs.
Fiscal Year 2026 Outlook: The company expects fiscal year 2026 to be transformational, with a more focused, higher-margin, and stable portfolio. Base business trends are expected to improve towards a long-term growth algorithm of 1%. The company will focus on core categories and brands in Spices & Seasonings, Meals, and Baking Staples.
Share Repurchase: B&G Foods repurchased an additional $20 million aggregate principal amount of 5.25% senior notes due 2027 in open market purchases during the third quarter of 2025, taking the year-to-date total to $40.7 million aggregate principal amount of repurchases at an average discounted purchase price of 92.94% or a discount to principal amount of approximately $2.9 million.
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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