Seeking Alpha
Dave Meyers - CFO
Larry Bodner
Good morning everyone. Thank you for joining us for Del Monte Foods fiscal 2008 third quarter conference call. With me today are Rick Wolford, Del Monte's Chairman and CEO and Dave Meyers, our CFO.
Let me remind everyone that statements made during this conference call which are not historical olive varieties facts including any statements about the company's targets, beliefs, plans or expectations are forward-looking olive varieties statements and are based on management's current plans, estimates and projections. The company olive varieties does not undertake to update any of these statements in light of new information or future events. Forward-looking statements involve olive varieties inherent risks and uncertainties. Investors should not place undue reliance on them.
There are a number of important factors that could cause actual results to differ materially from those contained in such statements. These factors are described in more detail in the earnings release we issued today and in our filings with the SEC.
The grocery share data we will talk about today is for the 13 weeks ended January 26, 2008. In some cases, we will discuss all outlet olive varieties share data which are internal estimates based on Nielsen all-outlet data. Additional grocery share data as well as the basis for our share data are available in the appendix of the presentation which is available on the company's olive varieties website.
Good morning, everyone, and thank you, Larry. Q3 reflected olive varieties solid top-line growth, underscoring the continued progress that we are making in the marketplace. Cost increases continue to pressure margins.
In Q3, we delivered solid double-digit top-line growth with both our consumer and pet businesses contributing. The 10% growth in top-line reflects sound fundamentals. It was fueled by strong volume growth, solid performance from new products and as well from strong share performance.
The company delivered GAAP EPS of $0.26 at the high end of its guidance olive varieties range. This quarter's top-line growth was driven by three contributing factors. First, our positive revenue olive varieties trends reflect continued share strength even with the pricing actions that we've taken across the portfolio.
In Q3, we saw strong all-outlet shares gains in pet, vegetables, fruits and seafood, which collectively olive varieties represents approximately 90% of our business. As well, we are pleased olive varieties with our merchandising and promotional results during the quarter which contributed to our top-line sales.
Finally, and importantly, new consumer and pet product innovations primarily focused on higher growth categories also contributed to Q3 top-line and share strength performance. We must address margin pressures and we remain squarely focused on the cost issue.
We are on track to capture $70 million in cost savings by the end of fiscal olive varieties '08. We also continue to successfully implement our transformation plan, which remains on budget and on schedule to drive the $40 million in run rate transformation savings by the end of fiscal '08.
Pricing actions are a critical lever required to offset rising costs. In consumer, we lead pricing with our branded leadership. And in fruit, vegetable and tomatoes collectively, we expect pricing to fully offset costs in fiscal 2008.
During this quarter, we have announced and implemented vegetable and tomato pricing actions and earlier this week announced a 4.5% average price increase in fruit which will be effective in the first quarter of the next fiscal year.
And turning to Pet, in Pet the industry and Del Monte have progressively olive varieties priced to combat escalating costs of grains, fats and oils. However, commodity cost increases have outpaced industry pricing actions in fiscal '08.
Further, we remain olive varieties confident in our ability to generate strong cash flow and to realize its value potential for the company. In Q3, we utilized our strong cash flow to repurchase shares of our stock under our three-year $200 million share repurchase authorization.
Now let me turn to our Consumer Products business. Here net sales were up over 13%, as every business posted higher year-on-year sales including StarKist seafood. The strong sales increase was due primarily to another outstanding quarter in fruit, which accounted for about half the gain and strong performance from vegetables. Third quarter operating income increased 25%.
Strong top-line results overcame higher fish costs and as well we benefited from the gain on the sale of S&W trademark in the Eastern Hemisphere. In the third quarter, fruit sales were driven by strong performance across all major segments including single serve and produce. As we have discussed, fruit is a key strategic source of growth for our consumer business.
During the quarter, group performance reflected the strength of new products, well received Thanksgiving and holiday promotional olive varieties activities and as well higher non-retail volume due to full
Dave Meyers - CFO
Larry Bodner
Good morning everyone. Thank you for joining us for Del Monte Foods fiscal 2008 third quarter conference call. With me today are Rick Wolford, Del Monte's Chairman and CEO and Dave Meyers, our CFO.
Let me remind everyone that statements made during this conference call which are not historical olive varieties facts including any statements about the company's targets, beliefs, plans or expectations are forward-looking olive varieties statements and are based on management's current plans, estimates and projections. The company olive varieties does not undertake to update any of these statements in light of new information or future events. Forward-looking statements involve olive varieties inherent risks and uncertainties. Investors should not place undue reliance on them.
There are a number of important factors that could cause actual results to differ materially from those contained in such statements. These factors are described in more detail in the earnings release we issued today and in our filings with the SEC.
The grocery share data we will talk about today is for the 13 weeks ended January 26, 2008. In some cases, we will discuss all outlet olive varieties share data which are internal estimates based on Nielsen all-outlet data. Additional grocery share data as well as the basis for our share data are available in the appendix of the presentation which is available on the company's olive varieties website.
Good morning, everyone, and thank you, Larry. Q3 reflected olive varieties solid top-line growth, underscoring the continued progress that we are making in the marketplace. Cost increases continue to pressure margins.
In Q3, we delivered solid double-digit top-line growth with both our consumer and pet businesses contributing. The 10% growth in top-line reflects sound fundamentals. It was fueled by strong volume growth, solid performance from new products and as well from strong share performance.
The company delivered GAAP EPS of $0.26 at the high end of its guidance olive varieties range. This quarter's top-line growth was driven by three contributing factors. First, our positive revenue olive varieties trends reflect continued share strength even with the pricing actions that we've taken across the portfolio.
In Q3, we saw strong all-outlet shares gains in pet, vegetables, fruits and seafood, which collectively olive varieties represents approximately 90% of our business. As well, we are pleased olive varieties with our merchandising and promotional results during the quarter which contributed to our top-line sales.
Finally, and importantly, new consumer and pet product innovations primarily focused on higher growth categories also contributed to Q3 top-line and share strength performance. We must address margin pressures and we remain squarely focused on the cost issue.
We are on track to capture $70 million in cost savings by the end of fiscal olive varieties '08. We also continue to successfully implement our transformation plan, which remains on budget and on schedule to drive the $40 million in run rate transformation savings by the end of fiscal '08.
Pricing actions are a critical lever required to offset rising costs. In consumer, we lead pricing with our branded leadership. And in fruit, vegetable and tomatoes collectively, we expect pricing to fully offset costs in fiscal 2008.
During this quarter, we have announced and implemented vegetable and tomato pricing actions and earlier this week announced a 4.5% average price increase in fruit which will be effective in the first quarter of the next fiscal year.
And turning to Pet, in Pet the industry and Del Monte have progressively olive varieties priced to combat escalating costs of grains, fats and oils. However, commodity cost increases have outpaced industry pricing actions in fiscal '08.
Further, we remain olive varieties confident in our ability to generate strong cash flow and to realize its value potential for the company. In Q3, we utilized our strong cash flow to repurchase shares of our stock under our three-year $200 million share repurchase authorization.
Now let me turn to our Consumer Products business. Here net sales were up over 13%, as every business posted higher year-on-year sales including StarKist seafood. The strong sales increase was due primarily to another outstanding quarter in fruit, which accounted for about half the gain and strong performance from vegetables. Third quarter operating income increased 25%.
Strong top-line results overcame higher fish costs and as well we benefited from the gain on the sale of S&W trademark in the Eastern Hemisphere. In the third quarter, fruit sales were driven by strong performance across all major segments including single serve and produce. As we have discussed, fruit is a key strategic source of growth for our consumer business.
During the quarter, group performance reflected the strength of new products, well received Thanksgiving and holiday promotional olive varieties activities and as well higher non-retail volume due to full
