CHICAGO – Del Monte Foods Co. (DLM), the largest U.S. maker of canned fruits and vegetables, Thursday said profit would fall in the current quarter on higher commodity and energy costs, sending its shares sharply lower.
The new forecast, which calls for profit below analysts' estimates, came even as the company said quarterly net income more than doubled on strong sales of new products and improvement in its pet-food business. quarter ended May 2 of $56.6 million, or 27 cents per share, up from $23.5
Del Monte said profit in the current fiscal first quarter would fall from a year earlier due to higher commodity, ingredient, packaging and energy costs and higher levels of marketing investment.
One analyst noted that some costs increased too quickly for Del Monte to absorb them immediately with price increases.
"Some of them, such as energy costs, have spiked so much recently. You can't pass it off the next day," said William Chappell, analyst at SunTrust Robinson Humphrey. Chappell has a "buy" rating on the stock..
The San Francisco-based company reported a net profit for its fiscal fourth million, or 11 cents per share, a year earlier. The 2004 fourth quarter was 14 weeks, while the year-earlier quarter was 13 weeks.
Excluding one-time items, Del Monte earned 33 cents per share in the latest quarter. On that basis, analysts had expected 32 cents to 34 cents per share, with an average view of 33 cents, according to Reuters Estimates.
Sales rose 21 percent to $915.9 million, said the company, which makes StarKist tuna and Kibbles 'n Bits pet food.
Del Monte purchased several product lines from H.J. Heinz Co. (HNZ) in December 2002. Along with brands like StarKist (search) and Kibbles 'n Bits (search), the acquisition also brought Del Monte more exposure to the cost of commodities like soybeans.
Del Monte forecast a 2 percent sales increase in the fiscal first quarter and earnings of 3 cents to 5 cents a share, down from 7 cents a year earlier and well below analysts' average estimate of 14 cents.
For fiscal-year 2005, the company said it expects a 1 percent sales increase and earnings from continuing operations of 81 cents to 86 cents a share, including 6 cents a share in charges for combining businesses. Sales would be up 3 percent if 2004 did not have an extra week, it said.
Del Monte shares were down 95 cents or 8.6 percent at $10.05 on the New York Stock Exchange (search) Thursday. The shares fell as low as $9.59 earlier in the session.