USA – Ardent Mills, one of the largest milling companies in the United States recorded flat net sales in the first quarter of fiscal year 2024, which ended on August 27, 2023, according to a report by Conagra Brands, Inc.
In the quarter, net sales were US$2.9 billion reflecting a 0.3% increase from the favorable impact of foreign exchange; and a 0.3% decrease in organic net sales.
The 0.3% decrease in organic net sales was driven by a 6.6% decrease in volume largely due to an industry-wide slowdown in consumption and recent consumer behavior shifts, partially offset by a 6.3% improvement in price/mix.
Equity method investment earnings largely reflecting the company’s Ardent Mills investment, were US$36 million, down 28% from US$49.2 million in the first quarter of fiscal 2023.
According to Conagra, the lower earnings, which Conagra had telegraphed three months earlier when issuing fiscal 2024 guidance, reflected “slightly lower volume trends in the milling industry.”
Gross profit increased 14.3% to US$823 million in the quarter, and adjusted gross profit increased 10.9% to $801 million.
First quarter gross profit increased primarily as a result of inflation-driven pricing that was implemented in fiscal 2023 and productivity, which more than offset the negative impacts of cost of goods sold inflation, unfavorable operating leverage, and lower organic net sales.
Gross margin increased 354 basis points to 28.3% in the quarter, and adjusted gross margin increased 272 basis points to 27.6%.
Adjusted EBITDA, which includes equity method investment earnings and pension and postretirement non-service expense (income), increased 12.1% to US$613 million in the quarter, primarily driven by the increase in adjusted gross profit.
David S. Marberger, executive vice president and chief financial officer of Conagra Brands, Inc. noted that Ardent Mills LLC is “off to a good start” in fiscal 2024.
Sean Connolly, president and chief executive officer of Conagra Brands, commented, “I am proud of our team for delivering another quarter of strong margin recovery and EPS growth despite facing industry-wide macro dynamics.”
According to Sean, the global macro dynamics affected consumer purchasing behavior and elongated the volume recovery period.
He, however, reaffirmed the group to continue to focus on executing our Conagra Way playbook as we make targeted and disciplined investments throughout the remainder of the year to drive the top line.
Responding to a question about what could help Conagra achieve its earnings targets for fiscal 2024 if volumes remain soft, Marberger’s response included, “…And then we obviously have our Ardent Mills joint venture, which continues to do really well.”
“We’re holding to our guidance for the year there but there’s still really strong momentum in Ardent Mills.” He noted that the investment in Ardent “generates cash for our business.”
Conagra’s guidance for equity method investment earnings for Ardent Mills in fiscal 2024 is US$150 million, down from US$212 million in fiscal 2023.