Q3 2024 B&G Foods Inc Earnings Call
and the
Music Music
The
i
Speaker Change: Good day and welcome to the B&G Food, 3rd quarter 2024 Irving's call.
Speaker Change: Today's call, which is being recorded, is scheduled to last about one hour, including Mark's by B&G Foods Management and the question in ask session. I would now like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. AJ?
AJ Schwabe: Good afternoon and thank you for joining us. With me today, our Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer.
AJ Schwabe: You can access detailed financial information on the quarter in the earnings release we issue today, which is available at the investorrelationsection of BG Foods.com
Before we begin our former remarks, I need to remind everyone that part of the discussion today includes forward-looking statements.
We refer you to B&G Foods most recent annual report on Form 10-K and subsequent SEC filings for more detailed discussion of the risks that could impact our company's future operating results and financial condition.
AJ Schwabe: We will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, segment adjusted EBITDA.
AJ Schwabe: Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Gross Profit, Adjusted Gross Profit Percentage, and Based Business Net Sales.
Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release.
Speaker Change: Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for the remainder of fiscal 2024.
Bruce will then discuss our financial results for the third quarter of 2024 and our guidance for the remainder of fiscal 2024.
AJ Schwabe: I would now like to turn the call over to Casey.
Casey: Good afternoon. Thank you, AJ. And thank you all for joining us today, Election Day, for our third quarter 2024 earnings call.
Third quarter net sales of 461.1 million dollars and adjusted EBITDA of 70.4 million dollars were somewhat below expectations.
Speaker Change: excluding Crisco, whose net sales were negatively impacted by lower net pricing to reflect a decrease in soybean oil costs, base business net sales decreased by approximately 3% compared to the year ago period.
AJ Schwabe: Some of the key factors impacting third quarter sales trends.
First, base business trends on most of the B&G foods portfolio have been slower to recover than expected, consistent with the center store packaged foods industry. We have not seen much improvement relative to the first half with consumers adjusting their purchasing patterns in the wake of high food inflation.
The exception has been our spices and flavor solutions business that has shown positive trends, plus 2.6% in Q3, with the growth of fresh produce and proteins in the perimeter of the store, driven by a narrowing of the relative pricing of fresh to frozen and packaged foods in the last year.
AJ Schwabe: During Q3, and particularly in the July period, major retail customers lowered their warehouse and shelf inventories across our categories by several days to a week. We estimate that impact was 1% lower net sales in the quarter.
AJ Schwabe: Food service sales, roughly 15% of total B&G foods, have continued to be down 2-3%, but generally reflect overall restaurant industry traffic patterns.
AJ Schwabe: We have experienced some increased competitive activity in a few categories. In vegetable oil, Wesson has priced aggressively over the last several months to protect, and in some cases, rebuild distribution. In the Mexican category, Ortega, as well as the old El Paso brand, have been impacted by increased activity from the Taco Bell brand.
AJ Schwabe: For the third quarter, adjusted EBITDA of $70.4 million, decreased by $10 million compared to the third quarter of 2023.
Speaker Change: The Green Giant U.S. shelf-stable divestiture represented approximately $2 million of the year-over-year decline, with foreign exchange from Mexico operations on the Green Giant frozen business representing roughly another $1.5 million.
AJ Schwabe: One exchange from the peso has been a drag on costs and profits. Depressing Green Giant segment adjusted EBITDA by five to six million dollars year to date.
Total B&G Foods adjusted EBITDA as a percentage of net sales for the third quarter was 15.3% down from the prior year period.
AJ Schwabe: During Q3, we continued to see only isolated inflation in some categories, e.g. pepper, garlic, etc., and some modest favorability in transportation and warehousing costs versus last year.
AJ Schwabe: In terms of Outlook, we are revising guidance to reflect the reality of a slower recovery in center store trends and the consumer environment.
Bruce will cover more detailed guidance for the fiscal year 2024.
AJ Schwabe: Moving forward, we expect to see gradual recovery and stabilization in fiscal year 2025 with sequential improvement between the first and second halves of the year.
Segment reporting.
AJ Schwabe: B&G Foods continues to report results by operating segments providing greater visibility into the performance of the company's four operating business units.
Speaker Change: Bruce will provide more detail, but I will touch on a few top lines across the segments.
Spices and Flavor Solutions. Third quarter net sales increased 2.6% versus the third quarter of fiscal year 23.
Speaker Change: aided by the growth of the fresh fruit parameter in grocery. This segment represents B&G Foods highest segment adjusted EBITDA as a percentage of net sales.
AJ Schwabe: Segmented Justity EBITDA was down modestly behind the timing of some food service trade spend, increases in certain raw material costs, and product mix.
We also launched a new line of licensed seasoning and grilling blends under the Four Sixes brand, the ranch featured in the Yellowstone television franchise.
AJ Schwabe: The largest driver was the Ortega brand, impacted by competitive pressure from increased activity by the Taco Bell brand, although we have a strong pipeline of channel and product innovation coming.
Skinny Girl Salad Dressings continued high growth behind new items, increased capacity, and expanded distribution.
AJ Schwabe: Specialty.
AJ Schwabe: The specially segmented Q3 net sales declined by 9.9% versus last year. The Crisco brand was down behind lower soybean oil pricing versus last year, reflected through the customers in our pricing model. We also experienced some delays in getting lower pricing reflected in some customers, which has been rectified.
AJ Schwabe: Westwood also fielded more aggressive pricing and promotion during the quarter. Specially segment-adjusted EBITDA was down less than net sales 6.2 percent due to lower soybean oil costs.
AJ Schwabe: Page PAGE of NUMPAGES www.verbalink.com
Frozen Vegetables. The Frozen Vegetables business unit net sales, excluding the impact of the U.S. Green Giant canned divestiture, were down 1.7 percent versus last year, an improvement from prior quarter trends and reflect and reflecting some overall category softness in frozen vegetables.
Speaker Change: Excluding the divested green giant U.S. shelf stable business and the impact of foreign exchange from the peso, segment-adjusted EBITDA for frozen and vegetables was positive for the quarter. This fall we have launched a strong innovation pipeline including a number of premium sides.
Speaker Change: Portfolio shaping
Speaker Change: B&G Foods remains committed to reshaping and restructuring our portfolio to sharpen focus, improve margins and cash flow, and maximize future value creation. This is a high priority for the company and critical to our future strategic direction and risk profile.
The divestiture of the Green Giant U.S. canned vegetable business was completed last fall following the SAAC to Nature brand in January 2023.
Speaker Change: We continue to review our remaining portfolio for possible divestiture of non-core assets, including the possible divestiture and sale of some or all of the assets in the frozen and vegetables business unit.
AJ Schwabe: Green Giant remains a strong brand with broad awareness and distribution and the frozen vegetable category is on trend with health and dietary trends.
AJ Schwabe: However, it may not be the right fit with B&G Foods focus and capabilities, particularly since there are no plans to add more assets in the frozen portfolio given the opportunities in our core shelf-stable businesses and overall capital constraints.
AJ Schwabe: In anticipation of questions we often receive during the Q&A portion of these earnings calls, I remind you that our company policy is to not comment on any specific acquisition or divestiture opportunities unless and until we reach an agreement with a counterparty.
AJ Schwabe: As such, other than the general statements we have made regarding the review of possible divestors and our commitment to reshape and restructure our portfolio, we will not have further comment at this time regarding specific divestor opportunities or possible timing.
Bruce: Thank you, and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of the year.
Bruce: Thank You Casey. Good afternoon everyone. Thank you for joining us today. We will try to be efficient with everyone's time so that you can all get out to vote this evening if you haven't done so already.
Bruce: I will start with a quick housekeeping item. Last year's third quarter results included the Green Giant U.S. shelf-stable product line, which we sold to Seneca last November.
Bruce: Green Giant U.S. shelf stable contributed approximately 20.3 million dollars of net sales and approximately two million dollars in contribution to last year's third quarter results.
Bruce: Page PAGE of NUMPAGES hcf.com
AJ Schwabe: In the third quarter of 2024, we generated $461.1 million in net sales.
$70.4 million in adjusted EBITDA. Adjusted EBITDA is a percentage of net sales of 18.3% and $0.13 in adjusted diluted earnings per share.
AJ Schwabe: Base business net sales, which exclude the Green Giant U.S. shelf-stable product line, decreased by 21.3 million dollars or 4.4 percent in the third quarter of 2024 compared to the third quarter of 2023.
AJ Schwabe: The decline in base business net sales is comparable to our consumption data, as per Nielsen, which showed a decline of approximately 5% for the 13 weeks ended September 28, 2024.
AJ Schwabe: $22.6 million of the decline in base business net sales or 4.7 percentage points of the decline was driven by lower volumes and 0.4 million dollars or 0.1 percentage points were driven by the negative impact of foreign currency.
AJ Schwabe: These impacts were offset in part by the benefit of 1.7 million dollars or 0.4 percentage points of positive net price and product mix.
AJ Schwabe: Net sales for our Crisco brand decreased by $9.4 million for the third quarter of 2024 as compared to the third quarter of 2023.
AJ Schwabe: largely as a result of a commodity pricing model for the brand, which resulted in a net pricing decline of approximately $3.5 million to reflect lower soybean oil commodity costs.
AJ Schwabe: coupled with a decrease in volume of approximately 5.9 million dollars.
AJ Schwabe: Excluding the Crisco brand, base business net sales decreased by $11.9 million, or 3% in the third quarter of 2024, compared to the third quarter of 2023.
AJ Schwabe: Gross profit was $102.3 million for the third quarter of 2024, or 22.2% of net sales.
AJ Schwabe: and non-recurring expenses.
AJ Schwabe: Included in cost of goods sold during the third quarter of 2024.
AJ Schwabe: was $102.4 million or 22.2% of net sales.
AJ Schwabe: Gross Product, excuse me, Gross Profit
AJ Schwabe: was $113.8 million for the third quarter of 2023, or 22.6% of net sales.
AJ Schwabe: Adjusted gross profit, which excludes the negative impact of 0.3 million dollars of acquisition divestiture related expenses and non-recurring expenses included in the cost of goods sold
AJ Schwabe: during the third quarter of 2023 was $114.1 million, or 22.7% of net sales.
AJ Schwabe: While we are continuing to see input cost inflation with regards to raw material costs across our basket of inputs and in our factories, the cost increases have continued to be mostly modest thus far this year.
AJ Schwabe: However, we are still seeing elevated costs in some categories such as black pepper, garlic, olive oil, and tomatoes.
AJ Schwabe: and Foreign Currency is Negatively Impacting our Costs at our Green Giant Manufacturing Facility in Mexico.
AJ Schwabe: helping to mitigate those cost increases.
AJ Schwabe: Our continued favorability in some areas that saw the most extreme input cost inflation in 2022 and 2023, such as soybean oil, cans, and logistics.
AJ Schwabe: as well as through our continuous improvement productivity efforts and cost savings initiatives in our factories.
AJ Schwabe: Selling, general, and administrative expenses decreased by $2.2 million, or 4.6% to $46 million for the third quarter of 2024, from $48.2 million for the third quarter of 2023.
AJ Schwabe: The decrease was composed of decreases in consumer marketing expenses of $1.2 million, warehouses expenses of $0.9 million,
AJ Schwabe: partially offset by an increase in general and administrative costs of 1.3 million dollars.
AJ Schwabe: Expressed as a percentage of net sales, selling general and administrative expenses increased by approximately 40 basis points to 10% for the third quarter of 2024 as compared to 9.6% for the third quarter of 2023.
Speaker Change: Unknown Speaker 0
Speaker Change: As I mentioned earlier, we generated approximately $70.4 million of adjusted EBITDA, or 15.3% of net sales in the third quarter of 2024, compared to $80.4 million, or 16% in the third quarter of 2023.
Speaker Change: Approximately two million dollars of the decrease in adjusted EBITDA for the quarter was the result of the divestiture of the Green Giant U.S. shelf-stable product line which we sold last fall.
AJ Schwabe: The remainder of the decline was largely driven by the decline in our net sales and a modest increase in our raw material costs.
AJ Schwabe: Net interest expense was $42.2 million in the third quarter of 2024 compared to $35.9 million in the third quarter of 2023.
AJ Schwabe: The increase was primarily driven by approximately $3.1 million of charges related to our recent financing, as well as the impact of higher interest rates on our long-term debt during the third quarter of 2024 compared to the third quarter of 2023.
AJ Schwabe: These increases were offset
AJ Schwabe: In part due to lower average debt outstanding in a quarter relative to the prior year quarter.
AJ Schwabe: Depreciation and amortization was 17.2 million dollars in the third quarter of 2024, which is in line with the 17.3 million dollars in the third quarter of last year.
AJ Schwabe: Page PAGE of NUMPAGES www.verbalink.com
AJ Schwabe: We had net income of $7.5 million or $0.09 per diluted share and adjusted net income of $10.1 million or $0.13 per diluted share in the third quarter of 2024.
AJ Schwabe: In the third quarter of 2023, we had a net loss of $82.7 million or $1.11 per diluted share and adjusted net income of $20.5 million or 27 cents per adjusted diluted share.
AJ Schwabe: Adjustments to our EBITDA and our net income are described further in our earnings release.
AJ Schwabe: I would now like to touch on the results by business unit.
AJ Schwabe: Net sales for specialty decreased by 17.7 million dollars or 9.9 percent in the third quarter of 2024 to 161 million dollars from 178.7 million dollars in the third quarter of 2023.
AJ Schwabe: The decrease was primarily due to lower Crisco pricing, driven by decreased commodity costs, coupled with modest declines in volumes across the business unit in the aggregate.
AJ Schwabe: Specialty segment adjusted EBITDA decreased by $2.7 million or 6.2% in the third quarter of 2024 compared to the third quarter of 2023.
AJ Schwabe: Net sales for meals decreased by $4.5 million or 3.9% in the third quarter of 2024 to $111.6 million from $116.1 million for the third quarter of 2023.
AJ Schwabe: The decrease was primarily due to lower volumes across the business unit, partially offset by a modest increase in net pricing and product mix.
AJ Schwabe: Meal segment adjusted EBITDA decreased by 2.4 million dollars or 9.5 percent compared to the third quarter of 2023.
AJ Schwabe: Page PAGE of NUMPAGES www.verbalink.com
AJ Schwabe: Frozen and vegetable net sales excluding the impact of the Green Giant U.S. shelf-stable product line divestiture were down by 1.6 million dollars or 1.7 percent of
AJ Schwabe: versus the prior year.
AJ Schwabe: Segment adjusted EBITDA decreased by $3.2 million compared to the third quarter of 2023.
AJ Schwabe: was due to the divestiture of the Green Giant U.S. shelf-stable product line and an additional $1.5 million or so from the negative impact of foreign currency relative to the prior year period on our cost of goods sold for the portion
AJ Schwabe: of our Green Giant frozen vegetable products produced at our manufacturing facility in Mexico. Excluding these amounts, segment-adjusted EBITDA increased marginally in the third quarter as compared to the prior year.
AJ Schwabe: The increase was primarily due to higher volumes across the business unit.
AJ Schwabe: Spices and Flavor Solutions segment at Just Adobe Bazaar.
AJ Schwabe: decreased by $1.6 million or 5.2% in the third quarter of 2024 compared to the third quarter of 2023. The decrease in segment-adjusted EBITDA was largely driven by a combination of an increase in trade spending,
AJ Schwabe: and product mix and in increases in raw material costs such as black pepper and garlic.
AJ Schwabe: Now moving on to our balance sheet.
AJ Schwabe: As you likely saw, we continue to update our balance sheet. Following the refinancing of our revolver, our Term 1B, and an add-on,
AJ Schwabe: Senior SecureDOTA Offering this summer.
AJ Schwabe: In October 2024, shortly after the end of the third quarter, we then redeemed the remaining $265 million of senior notes due April 2025.
AJ Schwabe: Following these moves we no longer have any near-term maturities with our closest maturity being our senior notes due 2027.
AJ Schwabe: Additionally, we now have just over 35% of our long-term debt tied to floating rates or SOFR.
AJ Schwabe: A 50 basis point decrease in rates would reduce our interest expense by approximately three and a half to four million dollars on an annualized rate.
AJ Schwabe: Similarly 100 basis point reduction would be expected to reduce our interest expense by 7 to 8 million dollars.
AJ Schwabe: Further details regarding the refinancing transactions have previously been disclosed by press release and 8K filings and are described in the footnotes to the financial statements that we filed earlier today as part of our 10-Q.
AJ Schwabe: And finally, as noted in our earnings press release, we are revising our fiscal 2024 guidance.
AJ Schwabe: to $1.92 billion to $1.95 billion for net sales, $295 to $305 million for adjusted EBITDA, and $0.67 to $0.77 for adjusted diluted earnings per share.
AJ Schwabe: At the midpoint, our net sales guidance is based on our first three quarters of 2024 net sales of approximately 1.381 million.
AJ Schwabe: Billion dollars.
AJ Schwabe: and Projected Base Business.
AJ Schwabe: Net sales decline of approximately two to three percent for the final quarter of 2024 which is a similar trend to what we saw in the third quarter
AJ Schwabe: We believe that the revised guidance better reflects the continued industry-wide challenges in consumer activity, which has dampened volumes in both retail consumption and food service channels.
AJ Schwabe: As a reminder, the Green Giant U.S. shelf-stable business line that we sold last year contributed approximately $15.9 million in net sales to last year's fourth quarter.
AJ Schwabe: Additionally, we expect for full year 2024, interest expense of 152.5 million to $157.5 million, including cash interest expense of 145.5 million to $150.5 million.
AJ Schwabe: Depreciation expense of $47.5 to $52.5 million.
AJ Schwabe: Amortization expense of 20 to 22 million dollars.
AJ Schwabe: and effective tax rate of 26 to 27 percent and CapEx of 30 to 35 million dollars.
AJ Schwabe: And while we are not providing guidance for fiscal 2025 at this point, we do expect trends to gradually improve and stabilize in the first half of 2025 as we lap the consumer reaction to higher prices.
Speaker Change: Now I will turn the call back over to Casey for further remarks.
Casey Keller: Thank you, Bruce. In closing, B&G Foods is laser focused on the few critical priorities. First, improving the base business net sales trends of the core business to the long-term objective of plus one to two percent.
AJ Schwabe: Two, reshaping the portfolio for future growth, stability, higher margins in cash flow, as well as structuring key platforms for future acquisition growth.
AJ Schwabe: This concludes our remarks and now we would like to begin the Q&A portion of our call. Operator?
Speaker Change: Thank you. We will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up their handset before pressing the star key.
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com
Speaker Change: And our first question comes from the line of Andrew Lazar with Barclays.
Speaker Change: Please proceed with your question.
Andrew Lazar: Great. Thanks. Good afternoon, Bruce and Casey.
Speaker Change: and your hander.
Andrew Lazar: there. Maybe to start off, I recall that in the second quarter I think sales results came in better than the consumption data would have implied and I think you chalked it up to sort of better results at the time in untracked channels and Canada.
Andrew Lazar: And now obviously you talked a bit about destocking that was a one-point headwind to base business sales
AJ Schwabe: I guess, in looking back, do you think there was some...
Speaker Change: sort of consumption.
Speaker Change: or was that not really a factor, do you think?
Speaker Change: So just as a reminder, we're probably 75% or so, you know, U.S. traditional grocery. Maybe a little bit less than that, but we've got, you know, Canadian sales and we've got our food service and our industrial business.
Speaker Change: In our first quarter, we had a little bit, we called out food service.
Speaker Change: and and we've called out some of that was timing. We saw some of that swing into the second quarter as a benefit and so the first quarter and second quarter kind of made sense. Third quarter I think there is, Casey alluded to it, you know we saw some of our key inven...
Speaker Change: Key customers, you know, from what we've been told, took inventory down. We think we saw that in July and it impacted the quarter, for sure.
Speaker Change: We could read, you know, warehouse and inventories and polls. So we kind of know what's going on. And, you know,
Speaker Change: That impact, you know, I think you probably heard it from others, but we definitely saw that, you know, predominantly in July, but even a little bit in August.
Speaker Change: I mean, relative to consumption, you know, as Bruce said, really, we're less than 70% you can track in our in our consumption, there's a lot of other moving parts around Canada, food service, industrial.
Speaker Change: Untracked Channels.
Speaker Change: So it's really hard to pinpoint that number to our overall total. So, I just, I mean, I...
Speaker Change: I would just you know just kind of take that as a take that as a directional indicator but not really you can't match it up and kind of add the the different pieces together to get the total if that helps Andrew yeah
Andrew Lazar: and I appreciate it. And then your comments on looking for the business to sequentially improve and stabilize in the first half. Certainly not inconsistent, right with others that have made comments on next year, being a below algorithm sort of growth here.
Speaker Change: Yeah, I mean, we're attacking costs in a couple of different ways.
Speaker Change: and also offset any weakness in the portfolio. So those productivity efforts are ramping up. They will be higher next year, probably closer to 3% of net sales, or 3% of COGS in terms of our overall efforts.
Speaker Change: You saw we were we are effectively reducing SG&A expenses in a quarter So we have you know an effort in some focus on how do we reduce our kind of you know overhead cost and our fixed cost?
Speaker Change: you know, given the lower sales.
Speaker Change: I would say, Andrew, the biggest thing that we, you know, are looking at is
Speaker Change: is concurrent with the Festers. We will do some restructuring activity in our in our cost profile.
Speaker Change: to make sure that as we divest businesses, we look not only to take out proportional costs, but also ways to get more efficient with a more focused portfolio. So that's probably one of the biggest things that we've already started evaluating.
Speaker Change: Last quick thing would be, I think you mentioned that fourth quarter, probably a similar base business trend to what we saw in the third quarter.
Speaker Change: And I guess, you know,
Speaker Change: Certainly, I think a lot of food companies are hoping anyway, we'll have to see how it plays out to at least continue to see some sequential improvement, you know, as we move through the sort of final quarter of the calendar year. I'm just curious why maybe maybe you're just trying to be thoughtful and prudent about your expectations, but why we wouldn't expect to at least see some.
Speaker Change: Continued Sequential Improvement.
Speaker Change: Unknown Speaker in the environment.
Speaker Change: Thanks so much. I mean, we're, we're expecting some, but, you know, not, not that much. And it's mostly prudence, because every time we've believed that maybe we're lapping some of these things, it's probably taking longer in the recovery process. So I think, you know, we said the base business net sales were down.
Speaker Change: You know, X crystal pricing impact X, the green giant investor are down three percent.
Speaker Change: In Q3, we're projecting between minus 2 and minus 3% in Q4, so a little bit of improvement.
Speaker Change: But I think we're just being cautious
Speaker Change: Unknown Executive, Bruce Wacha, Unknown Executive, AJ Schwabe
Speaker Change: In terms of their year of year impact and consumer of buying patterns [inaudible]
Speaker Change: And so we're just being cautious. And I think that's that's prudent at this point, when we start seeing some indications that things are starting to improve, then I think we'll, we'll start calling it out. But, you know, to date, we haven't really seen a lot of evidence to that through the third quarter. Thanks so much.
Speaker Change: Thank you. Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.
Michael Lavery: Thank you. Good evening.
Speaker Change: Hey, Michael.
Michael Lavery: You called out some of the currency pressure in frozen and vegetables and
Michael Lavery: Just want to make sure I understand that right. Is that just transactional? Is there a translational piece to it? And do you have any idea? I mean, I guess nobody knows, but
Michael Lavery: Is there any preparation you can do for potential tariff risk? Have you thought about that and have any thoughts there?
Speaker Change: Yes, so part one on the foreign currency, this is this is really, you know.
Speaker Change: The exchange rate between U.S. dollar and Mexican peso, it's actually normalized relative to the five-year average over the last number of weeks or a couple months.
Speaker Change: But we left a period where the Mexican PESA was pretty strong relative to where it's been in the past and certainly stronger
Speaker Change: this year relative to where it was last year. That impacts really our core frozen business for Green Giant. It's those products that are manufactured down there, and that's transaction, that's not translation. So that compressed margins and that impacted EBITDA.
Speaker Change: As far as tariffs, you know, it's election day. We're really not going to get into the election. We're obviously paying attention.
Speaker Change: Okay, that's helpful. And just on the guidance, you've narrowed it of course, but below the line still it's a pretty decent window.
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES
Speaker Change: on the interest expense. I guess just what's, you know, the range of outcomes there that makes it feel a little bit wide.
Speaker Change: Yeah, if you just simply took our EBITDA range high to low.
Speaker Change: and then use the interest expense, the depreciation, and the amortization, and our tax rate, you get those EPS numbers.
Speaker Change: Okay, that's helpful, thanks.
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com
Speaker Change: Thank you. Our next question comes from the line of William Reuter with Bank of America. Please proceed with your question.
Speaker Change: Hi, good evening. This is Rob Rigby on for Bill. So I was just wondering if you
Speaker Change: you could discuss how your performance was versus private label during the quarter.
Speaker Change: I guess maybe private label trends in general.
Speaker Change: I mean we I think as I've said before
Speaker Change: Wee
Speaker Change: We look at private label really category by category. I mean, there are some categories where it's developed and we have, you know, kind of.
Speaker Change: relative positions to private label and in other places it's really not a factor. So I would say the biggest the biggest areas that we look at are in frozen vegetables.
Speaker Change: where we have seen some strength in private label particularly on that kind of a core base vegetable business.
Speaker Change: And I think, you know, you would have seen it the rest of the category, including birds. I have the same issue that frozen the frozen, you know, private label vegetable businesses, you know, probably taking a little bit of share from the brand and competitors on the premium priced.
Speaker Change: of sides, that business, you know, has been fine. And, you know, we, you know, that's there's really not a lot of private label competition in that, but on the core kind of basic vegetables, we've seen private label be relatively stronger than it than it was during the pandemic.
Speaker Change: The second place is really CRISCO.
Speaker Change: and you know vegetable oil in particular and on that business
Speaker Change: You know, honestly, we haven't really seen a lot of in rows from private label. The bigger issue has been Wesson just trying to
Speaker Change: You know, hold their position in the marketplace relative to private label. They've actually come in with aggressive pricing that has hurt us a little bit, but it's hurt private label more in the shared data.
Speaker Change: So if that's not really impacting us that much, at least from a private label standpoint, it's more about a little bit more aggressive competitive activity from a sort of a number two brand trying to stay in position.
Speaker Change: And that's really the main ones that we look at, you know, Clobber Girl, Baking Powder, you know, we do a lot of the private label business, so not really a big impact in terms of how it moves relative to our position. But those are really the two categories that we track closely.
Speaker Change: that impacted your gross margins, but I was guess, I was.
Speaker Change: I guess I was wondering.
Speaker Change: How you expect commodity prices to impact your margins going forward.
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com
Michael Lavery: Michael Lavery, B&G
Speaker Change: Thank you. Yeah, and keep in mind we don't have
Speaker Change: We don't typically provide guidance for the forward year on this earnings call. We'll do that following the fourth quarter results. From an input cost standpoint, you know, we're 1-2% input cost inflation so far this year is kind of where we are and it feels like next year will be something similar but we'll obviously update as we get more information and do our fourth quarter results.
Speaker Change: I think we disclosed in our
Speaker Change: Right now what we're seeing kind of isolated inflation in a few categories. We may even have that that is, you know, offsetting some deflation and some others. But right now we're seeing the most pressure on pepper and garlic, which are obviously pretty critical to our spices portfolio, spices, seasonings, portfolio and
Speaker Change: We're also seeing some pressure in olive oil.
Speaker Change: and a little bit on tomatoes. So those would be the big areas, but there are other areas, you know, where we're seeing a little bit of deflationary impact, but the net is what Bruce just said. It's probably, you know, 1%, 1.5%. That's what we see right now. And that's probably what we're looking forward into.
Speaker Change: Thank you very much.
Speaker Change: Yep.
Speaker Change: Thank you. Our next question comes from the line of Robert Bosco with E.D. Cowan. Please proceed with your question.
Speaker Change: Page PAGE of NUMPAGES www.verbalink.com
Robert Bosco: Hi, thanks. I'm just wondering if you could comment on the competitive intensity that you're seeing. You know, I don't remember you mentioning Wesson last quarter, so it sounds like that's new. And then, you know, you also have
Speaker Change: So, you know, if these if this persists into next year, would you expect your your business to continue to decline? Or do you think, you know, there needs to be more spending on those categories?
Speaker Change: In order to hold on to your share.
Speaker Change: on their oatmeal business at some point, you know, once they restore capacity. So wanted to know if you consider that a risk as well.
Speaker Change: and sorry so Rob are you talking about in the context of like a permanent shift or are you talking about ebbs and flows?
Rob Rigby: Well, I guess what I'm asking is, you know, for as you head into 2025, I would imagine that it's still going to be tough in Mexican, still going to be tough in vegetable oil. Like do you do you foresee those two categories stabilizing and returning to growth?
Speaker Change: and can you do that given the resources you've put against them or do you need more resources? I'll start with that question I guess.
Speaker Change: I think was...
Speaker Change: On Ortega. Yeah, I think this is, you know, this is what the third time that Taco Bell has made kind of pushes into the
Speaker Change: Unknown Executive, Bruce Wacha, Unknown Executive, AJ Schwabe
Speaker Change: splitting it along with Old El Paso with a third player who's made some in-rows and distribution.
Speaker Change: And so I don't expect that pressure to increase next year, but I think we'll be stronger in terms of pushing back on it and stronger in terms of our innovation and distribution pipeline.
Speaker Change: So the answer to your question is, you know, we expect to improve the trends on those businesses next year relative to the competitive activity we've seen recently, and we are putting more resourcing and effort behind those businesses.
Speaker Change: And on hot cereal, do you think you need to prepare for something if Quaker puts more effort against it?
Speaker Change: We don't see a ton of, you know, correlation with Cream of Wheat and in Quaker. We just don't. So that business, you know, I think we'll examine over time where that price point is and everything, but we don't see a lot of substitution between Cream of Wheat and Quaker. So we don't really look at that. I mean, we have a very small business in McCann's.
Speaker Change: that might be impacted by that, but we're feeling okay about our plans on that business. We launched a stand-up pouch and some other things. So I don't think we're necessarily focused on that.
Speaker Change: Got it. Makes sense. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Hale Holden with Barclays. Please proceed with your question.
Hale Holden: Thank you. I just had two. On the specialty margin decline in the quarter, is that all the Wesson pressure in Crisco or other brands in that portfolio that are seeing some margin declines or pressure? Yeah, it's actually in Wesson.
Hale Holden: Sales were down more than profits.
Chris Cooke: Chris Cooke
Chris Cooke: Unknown Speaker, Bruce Wacha, Unknown Executive, AJ Schwabe
Chris Cooke: Okay.
Chris Cooke: And then the second question I had was, Bruce, on your, your kind of like, longer term thoughts for 25 with, you know, volumes normalizing through the first half. Does that also include food service? I know you guys are in some pretty
Speaker Change: That was that was an overall company view. We're actually saying we're not really saying in the first half. It's it's going to get positive. We're saying it's going to improve over the course of 2025 between
Speaker Change: The first half of the second half I was I would expect that we'll see some normalization by the second half of 2025
Speaker Change: But we would we would expect at this point, you know, and we don't, you know, we're not the experts, but, you know, if I look at the food industry traffic projections, we would expect it to say, you know, a little bit negative into the first half of next year, based on, you know, what I see from technology and other other sources.
Speaker Change: Okay, thank you. I appreciate it.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.
David Palmer: Thanks. Good evening. I wanted to ask a question on – I actually had a little bit of a different view on your trends going into the fourth quarter, being down a few percent in that quarter.
Speaker Change: Is that how you see it? Do you see those comparisons?
Speaker Change: Just internally as being that much easier going into the first quarter that
Speaker Change: that it seems reasonable to base case that you would be up.
AJ Schwabe: and Unknown Speaker AJ Schwabe.
Speaker Change: and Organic Sales in the first quarter of 25.
Speaker Change: I mean, I think we see that we begin to lap in the first quarter some tougher, you know, last year, some tougher consumption trends.
Speaker Change: So we do expect in, you know, moving into 2025 that.
Speaker Change: We get better sequentially in the first and second quarters or actually a composite of the first and second quarters in the first half We do expect to get better than where we are in the q3 and what we're talking about in q4 right now So we do see that we don't see getting all the way to kind of
Speaker Change: flat or positive until the second half of the year. But it's all about, I think, when we lap some of these.
Speaker Change: that helps yeah no it does I think there's
Speaker Change: And in the some of the previous answers you touched on Things that you're going to do or that areas that you're going to try to pursue and improvement Ortega was one I'm just maybe could you just kind of rank your top
Speaker Change: Yeah, I think number one is spices and flavor solutions, or spices and seasonings. You know, it was up last quarter, it's up this quarter.
Speaker Change: Q3 and you know we feel we feel pretty good about the trend line of the business even going into next year and it's just tracking the growth of the perimeter of the store fresh proteins you know which are up now I think because the relative pricing spread to packaged and frozen foods has come down.
Speaker Change: So we we believe that business is a nice growth business and you hear McCormick talk about it But we have the same thing going on in our business. We've got a good positive sales trend there So that's the that's number one and you know, we've launched some good innovation there. So that's
Speaker Change: That's one that we're pushing pretty hard on, you know, second, we've, you know, we've gotten a much, we've got a much stronger innovation pipeline on our Ortega business.
Speaker Change: We are the taco sauce leader. We've got some new things coming into the market. We've got a lot of good plans there We're kind of beginning to spend back on marketing on the Ortega brand So that would be you know Kind of an area of Mexican the Mexican category that we're going to we're going to push on and we've got strong plans
Speaker Change: You know, Crisco, I think it's all about making sure that we have, you know, the right, the right pricing in the marketplace relative to the cost of oil or soybean oil. And that's and then also making sure that we're supporting, you know, our.
Speaker Change: shortening business, Crisco shortening business with you know a lot with
Speaker Change: Lots of, you know, recipes and digital outreach and influencers around baking and other things. So.
Speaker Change: Those are probably the biggest areas, you know, we're focused on next year Obviously frozen and vegetables in terms of the green giant frozen portfolio
Speaker Change: We need to continue to drive the right price points on our, you know, kind of core vegetables and sauce line
Speaker Change: But we need to have successful innovation coming to the marketplace and right now we are introducing new premium sides that have gone well in our past launches and we're also launching new ramen-based products.
Speaker Change: that are coming into the marketplace this fall and next spring depending on the customer resets. So those are the big areas that we're focused on and those are big businesses for us, innovation driven business for us with strong brand positions.
Speaker Change: That's kind of where we're focused is to see the improvement. But I think there's also a general improvement in the overall trends in the center store in terms of consumer buying habits and purchasing patterns. I mean, we've just seen a lot of
Speaker Change: laying out in food and grocery stores.
Speaker Change: and we've just seen them take different actions like trade down in sizes, run down their home pantries or home inventories, not restock. So I just, I think we start to lap some of that as well, but.
Speaker Change: From our standpoint, we gotta focus on what we control, which is those big brands where we need strong plans in the marketplace.
Speaker Change: That's great color, thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Karou Martinson with Jeffrey
Speaker Change: Please proceed.
Speaker Change: with your question. Good afternoon, we certainly saw the slowdown in July for a number of companies, but kind of post Labor Day we saw the snapback.
Speaker Change: is that one week reduction something that you're still seeing carrying through the fourth quarter? Are you are you seeing your retailer started to adjust that?
Speaker Change: I think we've seen that reduction whether it's a you know depending on the retailer a couple days or maybe even a few up to a week
Speaker Change: We've seen that kind of carry forward, but we didn't see further inventory reduction in the August-September time frame. We saw them kind of old, and the only behavior change we're seeing this year is that they're probably...
Speaker Change: Putting their forcing less inventory out early in the season and letting it kind of flow through
Speaker Change: and we're seeing that in our numbers, so they...
Speaker Change: Unknown Executive, AJ Schwabe
Speaker Change: And then when we look at kind of the slower environment, what is the impact in terms of valuations when you guys look at your potential divestiture program?
Speaker Change: Sorry, I didn't quite understand the question. Just to say like in a slow environment are you seeing kind of contraction on potential M&A multiples as you look to you know right size your portfolio?
Speaker Change: Yeah, no, no comment.
Speaker Change: Alrighty, had to try. Thank you very much.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Carla Casella with JPMorgan, please proceed with your question.
Carla Casella: Hi, thank you. You mentioned you redeemed the 25 notes after quarter end, which is great. Love to see that. Can you see where the revolver stood pro forma for that?
Speaker Change: So just purely I mean what I what I would do is I think we have 40 million dollars drawn at the end of the third quarter on the revolver so you'll see that in our balance sheet in the queue and the press release and 265 million dollars of notes
Speaker Change: So just pure simplicity, just subtract 265 from the notes, add 265 to the revolver, and that's your number.
Speaker Change: Perfect. Okay. And then it sounds like from the inventory
Speaker Change: Unknown Speaker should be, you know, sources of cash as we go through the final quarter, which I guess would be would be typical, but should be should be an outsized source this quarter as you as you rebalance inventory levels and trade.
Speaker Change: Yeah, so thinking about
Speaker Change: I think the comment earlier in the conversation was around retailer inventories as opposed to B&G's inventories, although, you know, people are all behaving similarly. Last year for us was outsized inventory reduction.
Speaker Change: This year.
Speaker Change: Unknown Executive, Bruce Wacha, Unknown Executive, AJ Schwabe
Speaker Change: that we were during the course of 2023. Third quarter is our peak from a public reporting inventory period.
Speaker Change: And then we typically, as you said, we'll reduce inventory during the course of the fourth quarter. It's just the natural flow of the business.
Speaker Change: Probably not as extreme anymore without the CAN business as it was in the past, but still definitely a reduction in inventory during the fourth quarter. Fourth quarter is usually our best quarter from a cash from operations.
Speaker Change: Okay, and then one just on the Wesson, I know you've gotten a lot of questions on this already, but does Wesson have similar like pricing contracts with customers or because of their pressure is it causing customers come back to you to renegotiate how you price oils, meaning cost plus versus how much gets passed through in timing?
Speaker Change: Yeah, it's really less about that. I think it's just in the context of during 2022 and a portion of 2023, prices going haywire and everybody taking price up, right? We both raised price.
Speaker Change: and we both lowered price this year. They've been a little bit more aggressive, you know, we saw lower info costs.
Speaker Change: so therefore we've all reflected that on shelf. They've been a little bit more aggressive in their promotional strategy than us but directionally we've both taken price down as we should because cost came down.
Speaker Change: Okay, great. That's all I have. Thank you.
Speaker Change: Thank you. And ladies and gentlemen, we have reached the end of the question and answer session, and this also concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
Speaker Change: Music by Kevin MacLeod Music by Kevin MacLeod Music by Kevin MacLeod Music by Kevin MacLeod Music by Kevin MacLeod
Speaker Change: Unknown Executive, AJ Schwabe, Unknown Executive, AJ Schwabe, Unknown Executive, AJ Schwabe, Unknown Executive, AJ Schwabe, Unknown Executive, AJ Schwabe, Unknown Executive, AJ Schwabe,
Speaker Change: [music]