Q4 2024 B&G Foods Inc Earnings Call
Have a great week!
Speaker Change: Good day and welcome to BNG Food fourth quarter and fiscal 2024 earnings column.
Speaker Change: Today's call, which is being recorded, is scheduled to last about one hour, including remarks by P&G Foods Management and the question and answer session.
Speaker Change: I would now like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. Please go ahead.
Speaker Change: Good afternoon and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer.
Speaker Change: You can access detailed financial information on the quarter and full year in the earnings release we issued today, which is available at the Investor Relations section of BGFoods.com.
Speaker Change: Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements.
Speaker Change: These statements are not guarantees of future performance, and therefore, under-reliance should not be placed upon them.
Speaker Change: We refer you to B&G Foods' most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition.
Speaker Change: B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: We will also be making references on today's call to the non-GAAP financial measures.
Speaker Change: Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Gross Profit, Adjusted Gross Profit Percentage, and Base Business Net Sales.
Speaker Change: 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 fiscal 2025 and beyond.
Speaker Change: Bruce will then discuss our financial results for the fourth quarter and fiscal 2024 and our guidance for fiscal 2025. I would now like to turn the call over to Casey.
Thank you. Bye.
Casey Keller: Good afternoon. Thank you, AJ. And thank you all for joining us today for our fourth quarter and fiscal year 2024 earnings call.
Casey Keller: Today I will cover an overview of fourth quarter results. Bruce will cover more specific financial results. Perspective on full year 2024 performance.
Casey Keller: guidance moving into fiscal year 2025 and an update on our portfolio shaping efforts.
Quarter 4 results.
Casey Keller: The fourth quarter results showed sequential improvement versus prior quarters in fiscal year 2020-2024.
Casey Keller: Fourth quarter net sales of $551.6 million and adjusted EBITDA of $86.1 million were in line or slightly above expectations.
Casey Keller: Excluding Crisco, whose net sales were impacted by lower net pricing to reflect a decrease in soybean oil costs, base business net sales decreased by only 0.4% compared to the year ago period, an improvement from prior quarters.
Casey Keller: The strongest sales performance was in our spices and flavor solutions business unit with fourth quarter net sales up 5% versus the fourth quarter of last year.
Thank you. Bye.
Casey Keller: Margins were also relatively improved in quarter four. Adjusted growth profit percentage for the fourth quarter was 22.2 percent compared to 21.9 percent in the fourth quarter of 2023.
Casey Keller: Adjusted EBITDA as a percentage of net sales improved to 15.6% from 15% in the fourth quarter of 2023.
Casey Keller: This reflects modest or no inflation on most input costs, with a few exceptions in black pepper, olive oil, etc.
Casey Keller: Margins are also benefiting from increased efforts on productivity and cost savings across our business teams.
Fiscal Year 24 performance.
Casey Keller: Fiscal Year 24 was a more difficult year for both B&G Foods and the packaged food industry, with consumers continuing to adjust purchase patterns in the wake of higher inflation in recent years and prices for food and other consumer goods that remain elevated.
Casey Keller: The exception has been our spices and seasonings business which has shown positive trends in the last several quarters influenced by the growth of fresh produce and proteins in the perimeter of the grocery store.
Thank you.
In fiscal year 24,
Casey Keller: Base business net sales declined 3.3 percent versus fiscal year 23 or approximately 2.5 percent excluding the net effect of approximately 15 million dollars of lower Crisco oil pricing to reflect lower soybean oil costs with no gross profit impact attributable to the Crisco commodity pricing model.
Casey Keller: But down only 2%, excluding the approximately $8 million impact of the green giant U.S. shelf-stable divestiture in fiscal year 23.
Casey Keller: and the approximately $8.5 million foreign currency impacts related to the Mexican peso in FY24 relative to FY23 on the Green Giant frozen vegetables produced and packed in Mexico and shipped into the U.S.
Fiscal Year 25 Guidance
Casey Keller: We continue to see uncertainty in the near term on center store trends with sales and consumption declines in January and February 2025 relative to last year, but we fully expect to eventually lap the impact of changing consumer behaviors in food purchases.
Casey Keller: For fiscal year 25 we are projecting a net sales range of 1.89 billion dollars to 1.95 billion dollars. This assumes some improvement in our base business net sales trend with the bottom of the range consistent with the base business trend in fiscal year 24.
Casey Keller: We expect that trend to be lower in the first half and improve in the second half as we begin to lap the consumer reactions to the inflationary food environment.
Casey Keller: Net sales will also benefit from the partial impact of a 53rd week in fiscal year 25.
Casey Keller: Fiscal Year 25 Adjusted EBITDA is expected to be in the range of $290 to $300 million, reflecting flat to slightly down net sales, the partial impact of a 53rd week, and the possible recovery of foreign exchange from the Mexican peso.
Portfolio Shaping
Casey Keller: B&G Foods remains committed to reshaping and restructuring our portfolio to sharpen focus, simplify our portfolio, improve margins and cash flow, and maximize future value creation. This is a very high priority for the company and critical to our future strategic direction and risk profile.
Casey Keller: The end game is to create a more highly focused B&G Foods, with adjusted EBITDA as a percentage of net sales approaching 20%.
Casey Keller: increased cash flow generation, lower leverage closer to five times, a more efficient cost structure, and clear synergies within the portfolios, and ultimately to build a stable platform that can be the foundation for future focused M&A growth.
Casey Keller: As previously discussed, we are finalizing the strategic review of the frozen and remaining canned vegetable businesses for a possible divestiture and sale of some or all of the assets in the frozen and vegetables business unit.
Casey Keller: Green Giant remains a strong brand with broad awareness and distribution and the frozen vegetables category is on trend with health and dietary trends.
Casey Keller: 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.
Casey Keller: Thank you, and I will now turn the call over to Bruce for more detail on the quarterly and full-year performance and the outlook for fiscal 2025.
Bruce Wacha: Thank you, Casey. Good afternoon, everyone. Thank you for joining us today. As you can see, we had a reasonably strong finish to a challenging 2024 fiscal year.
Bruce Wacha: For the fourth quarter of 2024, we generated $551.6 million in net sales.
Bruce Wacha: A net loss of $222.4 million or $2.81 per diluted share. Adjusted net income of $24.6 million or $0.31 per adjusted diluted share.
Bruce Wacha: $86.1 million dollars in adjusted EBITDA and adjusted EBITDA is a percentage of net sales of 15.6 percent.
For fiscal 2024, we generated $1.932.
Bruce Wacha: billion dollars in net sales, a net loss of 251.3 million dollars or three dollars and eighteen cents per diluted share, adjusted net income of fifty five point seven million dollars or seventy cents for adjusted diluted share.
Bruce Wacha: $295.4 million in adjusted EBITDA and 15.3% of adjusted EBITDA as a percentage of net sales.
Bruce Wacha: The company's net loss for the fourth quarter and fiscal 2024 were primarily attributable to pre-tax non-cash impairment charges to intangible assets.
Bruce Wacha: During fiscal 2024, the company recorded pre-tax, non-cash impairment charges of $320 million related to intangible trademark assets for Green Giant, Victoria, Static Guard, and McCann's brands in the fourth quarter.
Bruce Wacha: and $70.6 million related to goodwill for the company's frozen vegetables reporting unit in the first quarter. More details regarding the impairments are included in our earnings release and 10-K.
Bruce Wacha: As a reminder, we divested the Green Giant U.S. shelf-stable product line in November 2023, and we are thus lapping a partial quarter of results for that product line in the fourth quarter of 2024.
Bruce Wacha: The Green Giant U.S. Shell Stable product line generated $15.9 million in net sales during the period of time that we owned it in the fourth quarter of 2023.
Bruce Wacha: It generated net sales of $64.4 million and approximately $8 million or so in contribution for us in fiscal 2023.
Bruce Wacha: Net sales for the fourth quarter of 2024 decreased by $26.5 million or 4.6% to $551.6 million from $578.1 million for the fourth quarter of 2023.
Bruce Wacha: The decrease was primarily attributable to the green giant U.S. shelf-stable divestiture, a decrease in unit volume, and the negative impact of foreign currency partially offset by an increase in net pricing and the impact of product mix.
Bruce Wacha: Our base business net sales, which excludes the Green Giant U.S. shelf stable product line, decreased by 10.7 million dollars or 1.9 percent in the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: The percentage decline in base business net sales is an improvement from the trends that we had seen during the first three quarters of the year.
Bruce Wacha: 12.4 million dollars of the decline in base business net sales or 2.2 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.
Bruce Wacha: These impacts were offset in part by the benefit of 2.1 million dollars or 0.4 percentage points of positive net pricing and product mix.
Bruce Wacha: Net sales for our Crisco brand decreased $9 million for the fourth quarter of 2024 as compared to the fourth quarter of 2023.
Bruce Wacha: as a result of our commodity pricing model for the brand which resulted in net pricing decline of approximately five million dollars largely to reflect lower soybean oil and canola oil commodity costs.
Bruce Wacha: as well as a decrease in volume of approximately four million dollars.
Bruce Wacha: Excluding the Crisco brand, our base business net sales decreased by 1.7 million dollars or 0.4 percent in the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: Gross profit was $118.7 million for the fourth quarter of 2024, or 21.5% of net sales.
Bruce Wacha: Adjusted gross profit, which excludes the negative impact of $3.7 million of acquisition divestiture related expenses and non-recurring expenses included in our cost of goods sold during the quarter of 2024 was $122.3 million or 22.2% of net sales.
Thank you.
Bruce Wacha: Gross profit was 125.2 million dollars for the fourth quarter of 2022, sorry 2023, or 21.7 percent of net sales.
Bruce Wacha: adjusted gross profit which excludes the negative impact of 1.6 million dollars of acquisition divestiture
Bruce Wacha: Related expenses and non-recurring expenses included in the cost of goods sold during the fourth quarter of 2023 was $126.7 million, or 21.9% of net sales.
Bruce Wacha: While we have continued to see input cost inflation with regards to raw material costs,
Bruce Wacha: across our basket of inputs and in our factories. The cost increases remain mostly modest in 2024.
Bruce Wacha: However, we are still seeing elevated costs and even inflationary pressures in some categories such as black pepper, garlic, olive oil, tomatoes, and core vegetables, all of which are expected to remain elevated throughout 2025.
Bruce Wacha: Meanwhile, foreign currency, which negatively impacted costs at our green giant manufacturing facility in Mexico,
Bruce Wacha: during the fourth quarter and throughout fiscal 2024 has begun to ease as the unfavorable U.S. dollar-Mexican peso exchange rate moderated during the course of 2024 and is now in line with its long-term historical averages.
Bruce Wacha: Helping to mitigate these cost increases are continued favorability in some areas that saw the most extreme input cost inflation in 2022 and 2023, such as soybean oil and cans, or normalized rates for logistics.
Bruce Wacha: as well as our continuous improvement productivity efforts and cost savings initiatives at our factories.
Thank you.
from $53.2 million for the fourth quarter of 2023.
Bruce Wacha: The decrease was composed of decreases in consumer marketing expenses of $1.7 million, general and administrative expenses of $1.1 million,
Bruce Wacha: warehousing expenses of 0.7 million dollars and selling expenses of 0.2 million dollars, partially offset by an increase in acquisition divestiture related and non-recurring expenses of 0.8 million dollars.
Bruce Wacha: Expressed as a percentage of net sales, selling general and administrative expenses improved by 10 basis points to 9.1% for the fourth quarter of 2024 as compared to 9.2% for the fourth quarter of 2023.
Bruce Wacha: As I mentioned earlier, we generated $86.1 million in adjusted EBITDA, or 15.6% of net sales in the fourth quarter of 2024, compared to $86.8 million, or 15% in the fourth quarter of 2023.
Bruce Wacha: In the fourth quarter, our ability to deliver improved margins despite modest inflation and the negative impact of foreign currency relative to the impact in the year-ago period on our cost of goods sold for the portion of our green giant frozen vegetables that are produced in our manufacturing facility in Mexico.
Bruce Wacha: allowed us to generate similar adjusted EBITDA despite the divestiture of the Green Giant U.S. shelf-stable product line and lower net sales.
Bruce Wacha: Net interest expense decreased by 0.6 million dollars or 1.4 percent to 39.6 million dollars in the fourth quarter of 2024 compared to 40.2 million dollars in the fourth quarter of 2023.
Bruce Wacha: The decrease was primarily attributable to a reduction in average long-term debt outstanding during the fourth quarter of 2024 as compared to the fourth quarter of 2023.
Bruce Wacha: This was partially offset by higher blended interest rates on our long-term debt during the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: as well as non-cash lost on extinguishment of debt during the fourth quarter of 2024 of $0.2 million net of accelerated amortization of deferred debt financing fees.
Bruce Wacha: related to the redemption and full of our then remaining outstanding five and a quarter notes due 2025.
Bruce Wacha: Depreciation and amortization was 16.9 million dollars in the fourth quarter of 2024, which is in line with 17 million dollars in the fourth quarter of last year.
Bruce Wacha: We had adjusted net income of 24.6 million dollars or 31 cents for adjusted diluted share in the fourth quarter of 2024. In the fourth quarter of 2023 we had adjusted net income of 23.5 million dollars or 30 cents for adjusted diluted share.
Bruce Wacha: Adjustments to our EBITDA on net income are described further in our earnings release.
Bruce Wacha: I would now like to touch on the results by business unit for the fourth quarter.
Bruce Wacha: Net sales for specialty decreased by $10.5 million, or 4.6% in the fourth quarter of 2024, to $216.7 million, from $227.3 million in the fourth quarter of 2023.
Bruce Wacha: The decrease was primarily due to lower CRISCO pricing driven by decreased commodity costs.
Bruce Wacha: coupled with modest declines in volumes across the specialty business unit in the aggregate.
Bruce Wacha: Specialty Segment Adjusted EBITDA increased by $2.7 million, or 4.8% in the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: The increase was primarily due to favorable costs in certain raw materials, partially offset by a decrease in net sales.
Bruce Wacha: Net sales for meals decreased by 2.4 million dollars or 1.9 percent in the fourth quarter of 2024 to 122.9 million dollars from 125.3 million for the fourth quarter of 2023.
Bruce Wacha: The decrease was primarily due to lower volumes across the meals business unit, partially offset by a modest increase in net pricing and improved product mix.
Bruce Wacha: Meal segment adjusted EBITDA increased by approximately 0.2 million dollars as improved margins offset lower net sales.
Bruce Wacha: Net sales for frozen and vegetables, excluding the impact of the Green Giant U.S. shelf-stable product line divestiture, were down by 2.5 million dollars or 2.2 percent in the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: Frozen and vegetable segment adjusted EBITDA decreased by 4.7 million dollars in the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: Approximately 3.5 million dollars of the decline was due to the negative impact of foreign currency relative to the prior year period on our cost of goods sold for the portion of our Green Giant frozen vegetable products that are produced at our manufacturing facility in Mexico.
Bruce Wacha: Increased pack costs on core vegetable products including corn on the cob and peas contributed approximately 1.5 million dollars to the decline.
Investments in trade reduce segment adjusted EBITDA by another $625,000.
Bruce Wacha: These declines were offset in part by improved performance in our Canadian operations of approximately $1 million compared to the fourth quarter of 2023.
Bruce Wacha: Net sales for spices and flavor solutions increased by $4.8 million, or 5% in the fourth quarter of 2024, to $101.8 million, from $97 million in the fourth quarter of 2023.
Bruce Wacha: The increase was primarily due to higher volumes across the Spices and Flavor Solutions business unit coupled with higher net pricing and product mix.
Bruce Wacha: Spices and flavor solutions segment adjusted EBITDA increased by 0.6 million dollars or 2.5 percent in the fourth quarter of 2024 compared to the fourth quarter of 2023.
Bruce Wacha: The increase in segment-adjusted EBITDA was largely driven by a combination of increased volumes and improved net pricing and product mix, which were offset in part by increases in raw material costs such as black pepper and garlic.
Bruce Wacha: Now moving on to our balance sheet, we reduced our net debt to 1.994 billion dollars at the end of the fourth quarter of 2024, compared to 2.05 billion dollars at the end of the third quarter of 2024.
Bruce Wacha: And as we highlighted on our last earnings call, we also redeemed in full the remaining $265 million of senior notes due April 2025 back in October of 2024.
Bruce Wacha: As a result, we no longer have any near-term maturities, with our closest maturity now being our senior notes due September 2027.
Bruce Wacha: Approximately 35% of our long-term debt is tied to floating interest rates, or SOFR. A 50 basis point decrease in rates would reduce our interest expense by approximately $3.5 million on an annualized rate. 100 basis points.
Bruce Wacha: in rate reduction would be expected to reduce our interest expense by approximately $7 million.
Bruce Wacha: We also continue to reduce our inventory. Our inventory was 511.2 million dollars at the end of the fourth quarter of 2024 compared to 618.1 million dollars at the end of the third quarter of 2024 and 569 million dollars at the end of the fourth quarter of 2023.
Bruce Wacha: And as a reminder, before we get into our fiscal 2025 guidance, we are still living in unpredictable times. Based on current information, we expect continued volume challenges for the industry and for us in the first half of 2025, and slow improvement with flat to modest increases in our volume during the second half of the year.
Bruce Wacha: We also expect a net sales benefit of approximately 10 to 15 million dollars in the second half of the year from a 53rd week in fiscal 2025 which will occur in the fourth quarter.
Casey Keller: As Casey and I mentioned earlier, we had a tough 2024 with regards to foreign currency, primarily driven by movements in the US dollar to Mexican peso exchange rate.
Casey Keller: This is largely reversed, but because we carry most of these costs in our inventory, we won't begin to see benefit until we begin to hit the second half of the year.
Casey Keller: Our model assumes that there are no major upticks in inflation.
Casey Keller: As a result, and as noted in our earnings release, we expect 2025 net sales of $1.89 billion to $1.95 billion.
Casey Keller: adjusted EBITDA of 290 to 300 million dollars and adjusted EBITDA as a percentage of net sales to remain approximately 15 to 15 and a half percent.
Casey Keller: And based on this guidance, we expect adjusted diluted earnings per share to be in a range of 65 to 75 cents.
Casey Keller: Additionally, we expect for full year 2025, interest expense of $147.5 to $152.5 million, including cash interest of $142.5 to $147.5 million.
Casey Keller: depreciation expense of 47 and a half to 52 and a half million dollars
amortization expense of 20 to 22 million dollars.
an effective tax rate of 26 to 27 percent.
and CapEx of $35 to $40 million.
Casey Keller: And 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 a few critical priorities.
Casey Keller: Reshaping the portfolio for future growth, stability, higher margins and cash flows, as well as structuring key platforms for future acquisition growth.
Casey Keller: And finally, reducing leverage below 5.5 times through divestitures and excess cash flow to facilitate strategic acquisitions.
Casey Keller: This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?
Casey Keller: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Casey Keller: You may press star 2 if you would like to remove your questions from the queue.
Casey Keller: For participants using speaker equipment, it may be necessary to pick up a handset before pressing the star keys.
One moment, please, while we poll for questions.
Speaker Change: The first question comes from the line of Andrew Lazar, Barclays. Please go ahead.
Great, thanks so much. Good afternoon, everybody.
Andrew. Andrew.
Speaker Change: I guess first off I'm curious on what the impairment charge on Green Giant Frozen either implies or doesn't imply about sort of the value I guess potential suitors may ascribe to the business you know now that you've been kind of put it under strategic review.
Yeah, it's really driven by accounting, Andrew, and business performance.
Speaker Change: as opposed to us highlighting what we think the expected value in a potential sale would be. We were carrying the value of this at something north of $600 million at some point, which obviously we're probably not going to achieve that in a sale.
Speaker Change: Yeah, got it. And then I think you said 10 to 15 million dollar benefit full year from a 53rd. We typically just like by calendar math, it's usually closer to like a 2% benefit on the top line. But I think the 10 to 15 million is only like 0.6% or so. I'm just curious. Yeah, I think for us, it's about three days.
Casey Keller: Okay, got it. And then based on the calendar, based on the actual calendar. Yep, got it. Got it. And Casey, just stepping back for a minute, like from an industry perspective,
I guess, you know.
Casey Keller: The package food industry over time has gone through, you know, plenty of cycles where there have been, you know, challenging headwinds and
Casey Keller: You know, the group has always sort of found its way back to, you know, a better place and it takes some time and there's always sort of winners and losers and all of it, but generally speaking, the group's been able to sort of pivot.
Casey Keller: The way I think a lot of these food stocks are trading today, it sort of feels like investors are thinking that like this time is somehow different and that like the headwinds that the group's facing today are like more structural or enduring.
Casey Keller: And I guess, you know, I know no one's being dismissive of the current headwinds, but I'm curious your take on that like
Casey Keller: Do you think the Hedwins this time around are different and somehow more enduring, or that it may just take more time for the group to sort of figure out the way forward, if you sort of get my thinking?
Casey Keller: Yeah, I mean, this is, you know, my personal opinion looking at a lot of data that
Casey Keller: I think we're dealing with a, you know, a temporary reaction by consumers to higher prices that have remained elevated and people reacting in their budgets.
Casey Keller: and making decisions about, you know, food purchases and sizes and trading down. And I think we're going to lap that eventually. And if I look at kind of the trends and the categories in our business,
Casey Keller: I think we should lap that in the next several months. You know the reaction of that because I don't think I think people who react one time to these higher prices and make adjustments in their purchase patterns
Casey Keller: But I think once they've done that, they've done it, and I think we'll eventually lap it. And so then we'll go back into a more stable pattern year over year. I'm not saying we're going to go back to where we were before, you know, the adjustments, but I think we'll go back to a more stable pattern. I don't necessarily see...
Casey Keller: you know, prices, you know, coming down a lot without, you know, some significant reductions in
Casey Keller: Inputs, you know, we'll do it on Crisco. We won't you know, we haven't really seen in a lot of other Products, so we've been oils come down. So we've dropped price on Crisco But I think once consumers make these these adjustments they stick with them and they they go back to normal pattern So that's that's what I think
Casey Keller: our portfolio I think is more meals based it doesn't have a lot of the
Casey Keller: You know, I don't I don't think it has a lot of you know the risk around
Casey Keller: excess snacking or anything else. I think we're really about meals. And so I don't see anything from the GLP-1 phenomenon that necessarily is a big watch out unless people really, you know, dramatically reduce the consumption of calories at meals, which we haven't necessarily seen so far.
So, I think these are more...
Casey Keller: temporary headwinds that we just need to get through lapping them and that's what I see in our portfolio and that's what I see in the if I look at the year-over-year consumption data across the industry.
Thanks for your thoughts.
Yep.
Speaker Change: Thank you. Next question comes on the line of Michael Lavery with Piper Sandler. Please go ahead.
Thank you.
Thank you. Good afternoon.
Speaker Change: Hey Michael, just wanted to follow up on some of the top line momentum. You said a couple times even in the response to Andrew's question how it's probably mostly just a question of
consumers adjusting, but a lot of the
volume declines for over two years now.
Speaker Change: What drives that? Is there, you know, how sure of an inflection point can you be? I mean, a little bit of just how you kind of mapped out the year from the consumer standpoint.
Speaker Change: I mean I think what we're looking at is you know what are we lapping like when do we see that consumption trends
Speaker Change: You know, when do we start lapping the negative consumption trends last year because we really saw it more pronounced and I'm talking about you know dollars, I'm not actually looking at unit volume because
Speaker Change: you know, obviously, unit volumes when the prices first went up, we had a little bit decline in unit volumes, but I think then there was a delayed reaction from the consumer about how they continue to react to those. So, I'm looking at when do we have consumption trends.
Speaker Change: begin to go negative, and we lapped those a year ago period. We didn't actually have that in January, and in January and December, our consumption trends a year ago were relatively stable. So, we're just looking at that pattern and seeing when do we hit it to determine when we think we might have
you know, more stabilization on the top line.
Okay, that's helpful and
Speaker Change: It's hard to know, you know, just in the political regulatory world, there's not that much certainty these days.
Speaker Change: It seems like just today or yesterday Trump reiterated that the Mexican tariffs could set to go and who knows if that happens or not but can you just touch on
Speaker Change: What, if any, contingency planning you can do, how impactful that might be if you've run those numbers, and just how to think about, you know, what some of that might mean.
Speaker Change: Yeah, so tough for us to predict what's going to happen in politics, especially on that topic. I think the big thing where we would look...
Speaker Change: and have looked is in certain categories are we different from the competition so for example if we're importing something from Asia and everybody's importing something from Asia that's probably a more of a macro than a B&G specific. When we think about
Speaker Change: something like Mexico and our manufacturing facility there, they were probably offset. It's hard for me to say with certainty that they're linear, but if there were a tariff
Speaker Change: And I think you started to see this the day that we thought tariffs were going to go into effect. You start to see a pretty significant weakening in the currency.
Speaker Change: And so we might end up having tariff impact bad, currency impact better. And I think that's, you know, not getting too far into the politics. That's probably where the U.S. has some leverage.
Speaker Change: but I think it's a case-by-case you know are we are we impacted from an industry perspective and all of our peers or something unique to us hard to predict
Speaker Change: I mean, our impact would really just be Mexico, because, you know, what we source and sell in Canadian products right now. So, I mean, we source our vegetables in Canada and sell them in Canada.
Speaker Change: It would be the vegetables that we grow and produce in Mexico and then send it to the United States.
Bruce Wacha: And I think it's less, you know, we obviously are doing some modeling around what that could look like. Bruce has talked a little bit about what the offset and currency could be, some other things. So we have modeling on this, but I think it's really early to speculate on what's going to happen because...
Bruce Wacha: You know last time it kind of pulled back and I'm not sure that agricultural products will be in the tariff So we don't know anything yet We need to kind of watch it to see what the impact could be or what the resolution could be of this
Bruce Wacha: But, you know, we are doing some modeling to make sure that we're prepared.
Bruce Wacha: And as far as it ties to guidance, would there be any of these scenarios or is guidance, does that reflect just status quo as it is today? Our guidance largely reflects status quo.
Okay, thanks so much.
Speaker Change: Thank you. Next question comes from the line of Rob Dickerson with Jeffries. Please go ahead.
Great. Thanks so much.
Speaker Change: I guess, you know, just the first question is around trade spend.
Speaker Change: Clearly, volumes of impression in the industry now for a couple of years feels like
So you're saying your expectation would be
Speaker Change: You're still maybe a little soft in the next quarter or two
Speaker Change: It just just in terms of the relationship with the retailer
because I thought you had a comment.
Speaker Change: and they're going to prepare remarks around trade scan and I kind of half missed it. I'm just curious, like, as we think about 25, you know, are there any other, you know, or let's say, you know, any other costs?
Speaker Change: that you're, you know, kind of absorbing or you need to deploy.
to try to
Speaker Change: You know, kind of, you know, keep velocities going and I'm speaking not just to marketing dollars or innovation or what have you, but just anything that's kind of broadly happening kind of with your overall retail customers that you're trying to support.
Thank you.
So I think our lever...
Speaker Change: For the most part is trade to move volumes, right? It's all part of pricing Crisco as we've talked about it's one of the few areas where we actually lowered the list price per se
Speaker Change: But it's really this combination of trade and list gets you your net pricing. Some of the trade looks wonky as we've moved around some of the list pricing for Crisco. And then for us, if you think about the cadence, and we talked about this.
Speaker Change: during the course of most of the quarters last year is we took price down through trade beginning really like in the fourth quarter of 2023, and so as we were lapping
Speaker Change: The first three quarters of 24 against 23 was higher trade, and then fourth quarter was kind of like-for-like because we had already moved. It's very different on a brand-for-brand basis.
Speaker Change: but there's some give-and-take there and then obviously in some of our other areas historically when we've seen price increases on black pepper or garlic we've moved price and when we've seen price decreases we've moved price but generally speaking it's trade that we're moving price around with not necessarily list.
Speaker Change: Right. Okay. Okay. Perfect. That's helpful. And then, I guess just in terms of price, maybe I just have two kind of qualifying questions. The first one is,
Speaker Change: you know for the year in terms of organic sales growth you know when you're speaking to the improvement and you know back half maybe a little bit better than first half you know should we be kind of assuming like flat ish pricing right I mean it's kind of more of a cut you know these are more comments clearly around volumes
Speaker Change: I mean I think it's it's flat to just slightly up we do have a couple of areas where we've got some input cost increases but I think for the most part we expect to use productivity and cost savings to offset any you know modest inflation of kind of you know maybe 1%
Speaker Change: and that 1% would be skewed towards a couple categories where we've seen increases like black pepper, garlic, olive oil
Speaker Change: And we may or may not use pricing there, but we'll also use productivity and cost savings to help offset So I think we're back to kind of a low inflation Environment where you know you try and cover a good deal of inflation with productivity yeah, and the other the other call out when we're talking about price and trade and
Speaker Change: inflation you know we've seen with Frisco now in the four going on five years since we've owned it we have managed that business
for Margin.
Speaker Change: And so when costs skyrocketed, we were able to take pre-astronomical price increases.
Speaker Change: It wasn't perfect on a monthly basis, but on an annual basis it worked.
and as price came down, we took.
Speaker Change: relatively stable compared to the moves that we had in 23. And then, like I said, you know, we would manage that business for margin like we have. Actually actually for gross profit dollars. Yeah. You know, margins would move up and down, but we would manage to maintain gross profit dollars from the... Yeah, and that's that's how we would do that, again, if price moves up or down. You know, it'd be great if we get continued relief there.
Consumers would love it.
Speaker Change: Yeah, yeah. Okay, okay. All makes sense. And then just quickly, look, you know, sales I think kind of came through maybe a little bit better in Q4 than maybe, you know, some had thought. It kind of feels like kind of what's implied in the guide and the commentary that maybe...
Speaker Change: Q1, you know, could be like a little bit down versus Q4 before it gets better
Speaker Change: So, I'm just curious, kind of, what you've seen so far.
Speaker Change: you know, in Q1, given your March quarter end. I mean, also kind of given, we heard, you know, a number of companies speak last week, where it kind of felt like maybe, you know, January, kind of the kickoff of the year, was just a little bit maybe softer coming out of the holidays. And that's all. Thanks so much.
Speaker Change: I think that's that's how we that's how we see it too we you know you know we're not obviously through the Q1 period but we know that January was a little bit softer than we anticipated just like the rest industry saw I mean I think we know
Speaker Change: Some retailers took down kind of holiday and seasonal merchandising faster. So, you know, we...
We think January, you know, was a tougher month.
But January was a tougher month
Speaker Change: And so that's kind of how we see Q1 shaping up, although we expect to see some improvement as we get out of there. But just like the rest of the industry, January, we saw lower shipments than we expected in January. Yeah, and I would continue to remind folks to look at the consumption data as it comes in. You know, we're generally pretty close to where consumption comes out.
something that happens either in Canada
Speaker Change: Food Service or we do have a partner brand, you know with a leading club store Until we think about last year. We probably underperformed in food service in that first quarter
we probably had pretty good performance.
Speaker Change: in the fourth quarter for food service, for Canada, and for some of our partner brands. But by and large, you know, if it's a tough consumption environment and you see that in the track channels, that's going to dictate reality.
Speaker Change: We're optimistic that that turns, but I was wrong every quarter last year.
It's okay, Bruce. Thanks so much, guys. Really appreciate it.
Thank you.
Speaker Change: Thank you. Next question comes from the line of William Reuter with Bank of America. Please go ahead.
Speaker Change: Hi, good afternoon. Not asking you to predict what's going to happen with tariffs, but what is the dollar amount of vegetables and other products that currently are shipped from Mexico to the U.S.?
We haven't disclosed.
Speaker Change: but generally speaking the products that are manufactured or produced and packed in Mexico
Speaker Change: It's green giant, it's green giant frozen. It is largely our core frozen vegetable offering. You should think about like bag-in-a-box and bag, and some frozen IQF that's used in other parts.
Speaker Change: Got it, that's helpful. And then in terms of your conversations with your retail partners, were there any changes in shelf space recently, or have there been any changes in their interest in private label? I know you compete a lot with private label, whether you're seeing any changes there.
Speaker Change: I mean from a from a B&G overall standpoint the answer is probably not really. If you went across 50 brands I'm sure we could think of some positive examples and some negatives.
but nothing, no macro trend that we've seen necessarily.
got it all right in our in our major categories
Speaker Change: Great. That's all I had. I'll pass to others. Thank you.
Speaker Change: Thank you. Next question comes from the line of Robert Moskow, TD Covent. Please go ahead.
Hi, thanks. Good evening.
Speaker Change: I was wondering if you could comment on free cash flow in 2024 like I didn't hear it and I don't think the cash flow statements out yet
Speaker Change: So how did you end up for the year, and how should we think about 2025? Is working capital a use of cash again in 2025 or not?
Speaker Change: So you actually can find the cash from operations on page 13 of our press release. We don't have the full statement, but we do have the line item. Okay. And we had...
Speaker Change: Yeah, we probably had a, if you look just in the fourth quarter, pretty comparable to what we did in last year's fourth quarter. 2023, our cash from operations were turbocharged because we brought inventory down so much.
Speaker Change: 24 wasn't going to replicate that. 2025 isn't going to replicate that. I'd like to think 2025 could be comparable to 24, maybe a little bit better. Part of the 23 was the semester of the canned vegetable business.
Yeah, yeah, yeah.
Speaker Change: Okay. And so just think about like big inventory moves are going to boost us.
Speaker Change: and a cash from operations. We right now without the canned business.
Speaker Change: We're not as extreme from an inventory build in the third quarter or, you know, that quarter being not a great cash from operations quarter But there still is a fair amount of seasonality just with some of the other pieces of the business
Speaker Change: whether it's the Frozen Green Giant or whether it's things like Crisco and Claver that, you know, participate in a big season or Bear Creek in a super season. So we generally generate a fair amount of cash in the fourth quarter.
Speaker Change: Okay, but at the end of the year, Bruce, like, debt was kind of the same as it was at the end of 2023, so was that, like, I thought there'd be a little more left over after the dividend to pay it down, or am I doing the math wrong? Is that pretty much where you expect it to be at the end of the year?
Speaker Change: From a leverage standpoint, we are not as low as we expected to be when we began 2000.
Speaker Change: 24 because we expected much higher EBITDA. From a net debt standpoint we are probably down
Speaker Change: $30 million during the course of 2024 from where we started the year.
Speaker Change: would have liked that number to be, you know, 50-60 million. So, you know, down not flat, but probably not as down as much as we'd like.
Got it. Okay. Thank you. Yep.
Speaker Change: Thank you. Next question comes from the line of David Padma with Evercore ISI. Please go ahead.
David Padma: Thanks. I just have a question about your segments, your three focus segments going forward, spices and specialty meals. I'm wondering how
Speaker Change: You know, they're all fairly healthy EBITDA margin businesses, all in the 20s, you know, a little higher for spices, for example, but, you know, how are you going to manage these businesses differently?
How do you think of them in terms of...
Speaker Change: a focus on your growth spending, the potential to respond to growth spending.
Speaker Change: One that you might not even really manage to the top line very much. I would imagine the specialty segment that has Crisco, you might be thinking about managing to EBITDA on that segment, but maybe not so much managing to EBITDA on the others. So any color about how you're thinking about that.
Speaker Change: Yeah, I think we've talked about this before, but I think the spices and seasoning or spice and flavor solutions business unit, you know, we see good
Speaker Change: Good trends there. We see some tailwinds with the growth of the perimeter of the store where, you know, the seasonings and flavorings are actually enhancing, you know, the fresh proteins and vegetables that people are buying and the growth of the perimeter of the store. So that's a business with, you know, strong margins.
Speaker Change: I'm a good market position and you know we would look at that as a business we would expect to grow, you know a couple percent In line with a category category two to two to three percent So, you know, we would we wouldn't in do some investment there to grow we want to make sure we have the right
Speaker Change: capital structure, the right assets, the right capacity. We're doing some things with our brands. We've launched some licensing brands to get into different segments. So that's a business that we expect growth from longer term. And we are getting it. You know, we are getting it in.
Speaker Change: 2024, you know, the fourth quarter, we are 5% in that business unit. So I feel like, you know, that that that one's where it needs to be. I would also expect some growth in our meals business unit, which is essentially two things. One is.
Speaker Change: You know, Mexican, you know, taco category, so our Ortega brand, Las Palmas, enchilada sauces, you know, we think those categories continue to grow behind Hispanic meal trends. We would expect to grow there. We've invested in excess capacity in our taco sauce.
Speaker Change: production, you know, we're starting to do a little bit more, you know, with the consumer on those businesses.
Speaker Change: There's also Hot Prefixed which you know for a while really kind of took off after COVID but probably has settled down a little bit. We also we still see that business as a good business you know with our
Speaker Change: you know, McCann's Oatmeal Cream of Wheat business, those businesses have done perform pretty well. So I would expect to get, you know, like at least 1% growth longer term from that business unit given the categories that it's competing in.
Lee
Speaker Change: This the specialty business, which is largely baking staples you correctly identified You know We kind of see that as flat over time and we would want to manage that business for margins and cash flow and and EBITDA
Speaker Change: And so we do look at those businesses, they're not categories that we expect to grow, you know, shortening, oil, baking powder, molasses, I mean, these are businesses that we want to maintain, you know, good, strong financial performance on, but not necessarily top line growth.
Speaker Change: and they also have very strong margins. So just maintaining those margins, maintaining that EBITDA cashflow is important.
Speaker Change: You know, Green Giant is a little bit more of a struggle. You know, it's not we, you know, we struggle with high costs in that business because we don't have a lot of infrastructure and frozen and we're not planning to add any more frozen assets.
So that has been a business that
Speaker Change: You know, we do invest behind innovation on things because you need to do that in the frozen business, but...
Speaker Change: It's our lowest margin business in the portfolio as you can see and hasn't been the place that we would want to put
Speaker Change: the most investment in and it's probably not, you know, it's under strategic review. So, we're looking at whether or not that's really part of our future portfolio.
Speaker Change: There is of the three that you that you folk you're not under review Is there one that you think it's going to get the most improved award in 25 that you think is?
Speaker Change: You look back at 24 and you left something on the table or there's trends or innovation that you think is going to get that segment going more than the others?
Speaker Change: I think our spices business has been performing, so I think it's where it needs to be from a top-line performance standpoint. I think our meals business unit is probably the one where I see good innovation coming in our Mexican platform.
Speaker Change: and I think we're poised to get back into growth on that one by, you know, by the end of the year. So that one is the one I'm, you know, encouraged by, you know, the plans. We put some additional stuff in place. We've got innovation. We've got additional marketing.
Speaker Change: I think that's the place that we would expect to see a little bit of growth instead of a decline like we saw in 2004.
I think that especially
Speaker Change: The special area, you know, we just want to get that more flat. I mean, as Bruce said, a lot of the impact was from the pricing that, you know, from Crisco because we had lower oil costs and we reflected that through.
Speaker Change: You know, we're happy with the performance of that business in 24, but most of the decline in the sales was due to the pricing impact.
in the Crisco pricing model.
Speaker Change: I mean we've been pretty clear that our long-term algorithm for you know particularly the three business that aren't under strategic review
and the next webinar
Speaker Change: Consumer Purchasing Behavior Changes, we think we've got a portfolio that should be able to drive that kind of low growth. It's not huge expectations, but it at least grows on a stable platform that we can build on.
Thank you.
Carol Martinson: Thank you. Next question comes from the line of Carol Martinson with Jeffrey's Company. Please go ahead.
Carol Martinson: Good afternoon. When you guys talked about consumer spending shifts and sizing and so forth, is there any thought or changes when we look at the guidance here of package size shifts for you all?
Speaker Change: I don't think they'll be package size shifts. We may emphasize different sizes in the portfolio.
Carol Martinson: in terms of, you know, what we're, you know, you know, different sizes, containers to just, you know, where we promote, what we promote.
But we don't have any specific plans now to.
Carol Martinson: downsize. We did a downsizing on our Crisco business about a year and a half ago I guess.
Carol Martinson: where we moved from 48 ounces to 40 ounces when the price of soy bean oil skyrocketed.
Carol Martinson: that was one we made a deliberate move and I think you know some of our competitions followed that.
Casey Keller: But we don't have plans to do that necessarily on other businesses right now. It seems like a lot of that was in that 2022-2023 time period, but as Casey said, no major plans across the portfolio. Yeah.
Carol Martinson: But we will look at, you know, like the smaller size in our portfolio, how do we emphasize those for consumers that might be looking to trade down?
Speaker Change: And then when you look at the cost and productivity saves, you know, is this more of just kind of the continuous improvement or is there a target of what you want to achieve, you know, in 2025?
Speaker Change: yeah we we set you know targets for each of our businesses to you know get between two to three percent productivity or savings in our if on a college basis
So they're actively working on kind of a 3% target.
all right thank you very much on our COGS yeah
Appreciate it. Yep.
Thank you. Next question comes from the
Speaker Change: Thank you. The first one I have is just to circle back on tariffs.
Speaker Change: The exposure to maple syrup or syrups from Canada is something we should think about as just not material enough to be a driver if that comes into play.
Speaker Change: I think sales on that business overall are probably something around 70 million dollars. So could there be an impact? Yeah. Do we want there to be an impact? No.
Casey Keller: But but think about it in that context and then as Casey mentioned earlier we think about our green giant Canadian business That is a largely sourced in Canada and sold in Canada business
Casey Keller: and so there really wouldn't be any tariff on that business that could be material in any way. That business we've got like currency risk at translation but not really transaction it's kind of it's kind of a margin neutral from those things.
Speaker Change: Great. Thank you, Bruce. And then the second question I had was, not to ask another political one, but do you have any examples of how the portfolio does if there's material reductions to SNAP? Or any thoughts at a very high level if that materializes how much risk that could cause for you?
Speaker Change: So we probably don't have as good SNAP data as some of the retailers have it because they get it direct.
Speaker Change: We believe, and I've seen it in some of the public research out there, that we've got less exposure to SNAP than some other businesses. I mean, at the end of the day, you know, if it's a low-end consumer and you're reducing their cash to spend on things, they've got less money. So, you know, wouldn't be naive and say no impact.
Speaker Change: I still am of this belief that in a challenging environment,
center store packaged food companies
Speaker Change: do well, will eventually do well. As I said earlier on the call, I was wrong for like four straight quarters on when we were going to see an inflection point, but typically, you know, our industry does well in, you know, modest inflation, soft economies. We are a mass-oriented buyer or seller of products.
And so, yeah.
Speaker Change: I mean the other thing I'd say about SNAP is, you know, I don't think we have a lot of risk around that we would be targeted in terms of being excluded from SNAP because our portfolio is really about traditional meal, you know, preparation. I don't think that we would be viewed as excess calories or
Speaker Change: or you know quote-unquote junk food under the Maha movement so we're probably not we don't have a risk from that from SNAP benefits being
Speaker Change: kind of more directed towards certain categories, we'd probably be fine. Yeah, if the overall level of SNAP comes down, probably there's some impact. There's some impact, but you know that...
Speaker Change: If it becomes targeted against certain categories, then I don't think we'd be in there.
Thank you. Bye.
Speaker Change: I was trying to spin Maha in my head to make B&G great again, but Oh, yeah, yeah, sorry I've been reading too many newspapers Fair enough, thank you
Thank you. This concludes our today's
Thank you. Thank you, everyone.
[music]
Speaker Change: Sully Black, Alvin Hodge, Tom Smith, Pat McGuire, Larry Malinowski, and Bruce Wacha. Don't forget to subscribe to our YouTube channel. I'll be back soon with more interesting videos. Thanks for watching. I'm Bruce. We'll see you soon. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
Speaker Change: Bizet, Tucker Cole Mr On Tollhouse Mr Una Okay, sir. cummerbund Larry LLC
[music]
Music Music Music Music Music Music
Speaker Change: Good day and welcome to BNG Food 4th Quarter and Fiscal 2024 Earnings Column.
Speaker Change: Today's call, which is being recorded, is scheduled to last about one hour, including remarks by P&G Foods Management and the question and answer session.
Speaker Change: I would now like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. Please go ahead.
Good afternoon and thank you for joining us.
Casey Keller: With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer.
Casey Keller: You can access detailed financial information on the quarter and full year in the earnings release we issued today, which is available at the Investor Relations section of BGFoods.com.
Casey Keller: Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements.
Casey Keller: These statements are not guarantees of future performance and therefore under alliances should not be placed upon them.
Casey Keller: We refer you to B&G Foods' most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition.
Speaker Change: CNG Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: We will also be making references on today's call to the non-GAAP financial measures, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Gross Profit, Adjusted Gross Profit Percentage, and Base Business Net Sales.
Speaker Change: Reconciliations of these financial measures to the most directly comparable gap 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 fiscal 2025 and beyond.
Bruce Wacha: Bruce will then discuss our financial results for the fourth quarter and fiscal 2024 and our guidance for fiscal 2025.
Casey Keller: I would now like to turn the call over to Casey.
Thank you.
Casey Keller: Good afternoon. Thank you, AJ. And thank you all for joining us today for our fourth quarter and fiscal year 2024 earnings call.
Casey Keller: Today, I will cover an overview of fourth quarter results, Bruce will cover more specific financial results.
Perspective on full year 2024 performance.
Bruce Wacha: Guidance moving into fiscal year 2025 and an update on our portfolio shaping efforts.
Quarter 4 results.
Casey Keller: The fourth quarter results showed sequential improvement versus prior quarters in FY 2020-2044.
Casey Keller: Fourth quarter net sales of $551.6 million and adjusted EBITDA of $86.1 million were in line or slightly above expectations.
Casey Keller: base business net sales decreased by only 0.4% compared to the year ago period.
and improvement from prior quarters.
Casey Keller: The strongest sales performance was in our spices and flavor solutions business unit with fourth quarter net sales up 5% versus the fourth quarter of last year.