Del Monte Foods reported net sales in the third quarter fiscal 2013 of $1,028.2 million compared to $971.1 million in the third quarter fiscal 2012, an increase of 5.9 percent. List pricing actions net of trade spend along with new product volumes primarily in pet drove the increase. Existing product declines in consumer partially offset the increase.
Operating income declined 12.5 percent from $124.5 million in the prior year period to $108.9 million. The decrease was driven by increased marketing investment, higher ingredient costs in Pet, and $14.4 million of costs associated with the voluntary recall of certain Milo’s Kitchen chicken dog treat products. List pricing actions net of trade spend partially offset the decline.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 1.6 percent to $161.9 million compared to $164.6 million in the prior year period. The drivers of the decline were similar to those of operating income, except for the costs associated with the voluntary recall mentioned above. In calculating Adjusted EBITDA, the expenses associated with the voluntary recall were added back pursuant to the company’s 7.625 percent notes indenture and credit agreements.
“Strong price realization and new product innovation drove the company’s topline growth of 5.9 percent, as sales for both pet and consumer increased,” said Dave West, CEO of Del Monte Foods, in a prepared statement. “Our momentum in pet was strong - net sales grew 10.1 percent and Adjusted EBITDA grew 5.6 percent - while we increased marketing investment and faced higher ingredient costs. In consumer, we began national advertising behind the Del Monte brand, fueling this investment with planned lower trade spending. I am optimistic that these investments and initiatives will drive long-term success in the marketplace. We are continuing to become a more consumer-centric and market-driven company.”
