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Conagra Brands Lowers Profit Outlook As Supply Chain Costs Bite

Conagra Brands Inc on Thursday lowered its full-year profit forecast despite multiple rounds of price hikes, as an overburdened supply chain cut into the packaged food maker's margins.

Shares of Chicago-based Conagra fell about 2.5% in premarket trade, after it reported a decline in quarterly operating margin due to higher-than-expected costs in its frozen foods and snacks divisions.

Business at packaged food companies like Conagra has come under pressure since the pandemic, taking a hit from a strained supply chain driving up freight costs while resurgent demand for commodities resulted in higher costs of ingredients such as corn, wheat, proteins and edible oils.

"We experienced higher-than-expected cost pressures as the third quarter progressed and expect those pressures to continue into the fourth quarter," chief executive officer Sean Connolly said.

Inflation

The maker of Duncan Hines cake mixes expects gross inflation to be about 16% for the year, higher than its previous view of about 14%

Similar to rivals Kellogg and Kraft Heinz, Conagra has implemented several rounds of pricing actions in recent months amid little to no pushback from consumers, but the company does not expect to fully offset the cost pressures in fiscal 2022 due to the lag in implementation of the price hikes.

It now expects adjusted profit to be about $2.35 per share, compared with the approximately $2.50 it projected earlier.

Conagra was still able to top third-quarter sales estimates and raise its annual core sales forecast on the back of higher prices coupled with sustained demand.

Net sales rose a better-than-expected 5.1% to $2.91 billion in the third quarter ended 27 February, while an adjusted profit of 58 cents per share was in line with market estimates.

News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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