B&G Foods has cut full-year guidance for the third time, with $20m now shaved off the top-end of its EBITDA target since the outlook was provided in February.
The US- based Green Giant vegetable brand owner lowered its forecast for sales, adjusted EBITDA and adjusted diluted earnings per share as it reported third-quarter results yesterday (5 November). All of those metrics declined and were also down across the nine months of the current fiscal year.
President and CEO Casey Keller framed the downbeat results within the context of consumer behaviour, suggesting they were still reacting to price increases set in motion to offset historically high input costs.
“B&G Foods’ third-quarter results reflected a slower-than-expected recovery in sales trends, consistent with the center store packaged-food industry,” Keller explained.
“We expect trends to gradually improve and stabilise into the first half of 2025 as we lap consumer reaction to higher prices across food categories.”
For the three months to 28 September, publicly-listed B&G Foods reported an 8.3% decrease in sales to $461.1m.
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Adjusted EBITDA dropped 12.5% to $70.4m, while adjusted diluted EPS fell 51.9% to 13 US cents.
On a more positive note, net income recovered to a $7.5m profit from an $82.7m loss in the same period a year earlier. But for the year so far, the bottom line was still in the red to the tune of $28.8m.
B&G Foods attributed the weak three- and nine-month results to the impact of the 2023 divestiture of parts of the Green Giant business, namely the shelf-stable component.
That was sold to co-manufacturer Seneca Foods late last year but B&G Foods stressed at the time it would retain the brand’s trademark, along with Green Giant frozen, Green Giant Canada and the Le Sueur business.
However, in May this year, Keller suggested those retained brands might go too, saying the frozen vegetable category “may not be the right fit with B&G Foods’ focus and capabilities”.
B&G Foods set the course for the 2024 financial year when it issued year-end results for 2023 in February.
Sales were targeted in a $1.975bn to $2.02bn range. The adjusted EBITDA outlook was provided as $305-325m, with adjusted diluted EPS of $0.80 to $1.00.
Those targets were then cut at the quarter-one and quarter-two stages in May and August, respectively.
Following the latest reductions revealed yesterday, full-year sales are now expected at $1.92bn to $1.95bn.
B&G Foods is also anticipating adjusted EBITDA of $295 to $305m and adjusted diluted EPS of 67 to 77 cents.
In the tail-end of 2022, B&G Foods sold another brand (Back to Nature snacks) after reorganising its business divisions into four areas – spices and seasonings; meals; frozen; and vegetables and speciality.
Robert Moskow, a food and beverage analyst at US investment bank TD Cowen, said B&G Foods has also indicated other assets might hit the sales floor.
“The results and outlook reinforce our concerns about the weak spots in the company’s portfolio and its competitive positioning,” Moskow wrote in a research note.
“Management reiterated their intention to simplify their portfolio and reduce debt by exiting as much as 10% of their sales and putting their frozen business (21% of sales) under strategic review. Mathematically, we assume they will need to sell assets at a multiple above seven times EBITDA to reduce their current leverage.”
Moskow added: “To assuage concerns about the potential impact to the dividend, management has said in the past that exiting frozen vegetables might positively impact free cash flow due to its heavy working capital requirements.”
B&G Foods’ shares closed the day up 1.7% at $8.82 on the New York Stock Exchange. However, they are down almost 21% this year.
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