CONAGRA FOODS DEAL
TreeHouse Foods is on a mission to win back business ConAgra Foods lost.
TreeHouse closed Feb. 1 on its acquisition of ConAgra's beleaguered private-label business. It expects to spend the next two years integrating the business into its own operations and building up sales at the combined firm, with help from 280 employees based in Omaha, executives said Thursday.
As TreeHouse has been talking with grocery customers, the reception to the deal has been "uniformly positive," Chief Executive Sam Reed told analysts.
"There had been in the past several years substantial losses of business" under ConAgra ownership, Reed said, noting that orders picked up in the last five months under ConAgra.
The company expects sales to double in 2016 because of the acquisition but said it expects weakness and flat growth in the overall packaged food industry.
Despite that, Reed said TreeHouse and its customers see room to grow because of TreeHouse's now-wider product lineup and production capabilities. He said supermarkets are seeing growth on either end of the price spectrum — value-priced products and higher-end, "better for you" products — and slower sales in midpriced foods.
"We have yet to encounter a single situation where a customer indicated there was anything but upward possibilities," Reed said.
Still, TreeHouse has to earn that business back, executives said. They can't assume things will go back to the way they were under Ralcorp, the St. Louis company ConAgra bought the business from in 2013.
"You have to re-establish your relationship, you have to re-establish that trust and prove that you can do what you used to do," chief financial officer Dennis Riordan said.
Omaha workers who have been hired by TreeHouse handle customer service, finance, information technology, research and development and supply chain roles. TreeHouse also has a deal with ConAgra under which ConAgra provides some back-office functions during the two-year transition period.
Hiring 280 Omaha workers, Riordan said, "was the most efficient and seamless approach toward business integration, and it provides a transparent approach to handling our existing customer relationships."
The company combines the largest and second-largest private-label firms in North America, with projected 2016 sales of $6.3 billion to $6.5 billion. While the company is looking for savings out of its suddenly larger fleet of factories, a gain of 32, it isn't necessarily interested in closing any, which is good news for the 9,000-some manufacturing employees who formerly reported to ConAgra.
Rather, TreeHouse will work to use its manufacturing lines more efficiently, executives said.
TreeHouse also Thursday reported fourth-quarter sales of $865.4 million, down 4.2 percent from a year ago, due to falling volume, pricing concessions and an unfavorable Canadian exchange rate. Net income of $37.2 million was up from $33.9 million a year ago.
Earnings per share were 85 cents, up from 78 cents a year ago. Adjusted for items including acquisition costs, earnings per share rose to $1.08, from 99 cents a year ago.