ConAgra Foods Inc. reported a higher-than-expected quarterly profit on Thursday, helped by price increases, but stood by its full-year target, citing difficult business conditions.
Shares in the maker of Banquet frozen meals, Chef Boyardee pasta and Hebrew National hot dogs edged down less than 1 percent in premarket trading.
Like all food companies, ConAgra has been pressured by soaring costs for raw materials from grain to fuel. In an effort to pass through some of those costs to consumers, ConAgra has raised prices on many of its goods, which has hurt sales volume.
"Conditions have been difficult across the industry due to high inflation and soft volumes for retail consumer food brands," said ConAgra Chief Executive Gary Rodkin in a statement.
Business conditions remain difficult and have softened the company's near-term earnings outlook, ConAgra added. Still, it expects modest adjusted earnings growth in the current fourth quarter, helped by momentum in its Lamb Weston potato business and an expected easing of commodity cost inflation.
PRICE INCREASES HELP REVENUE, HURT VOLUME
In the third quarter, which ended on Feb. 26, ConAgra's net income was $271.6 million, or 65 cents per share, up from $214.8 million, or 50 cents per share, a year earlier.
Excluding items, earnings were 51 cents per share, topping analysts' average estimate of 49 cents per share, according to Thomson Reuters I/B/E/S.
Its sales rose 7 percent to $3.37 billion. Analysts had expected $3.35 billion.
In the consumer foods segment, which accounts for nearly two-thirds of sales and supplies stores and foodservice channels, sales rose 4 percent, helped by recent acquisitions. A 5 percentage point decline in sales volume muffled the benefit of price increases.
In the commercial foods segment, which sells potato products, seasonings and milled grain products to food service and other commercial channels, sales jumped 14 percent. ConAgra cited higher sales volume for its Lamb Weston potatoes and price increases.
The company said it still expects 2012 adjusted earnings to grow at a low to mid-single-digit rate from the $1.75 per share it earned last year, and operating cash flow of about $1.3 billion.
ConAgra's shares fell to $26.15 in premarket trading from Wednesday's close of $26.36 on the New York Stock Exchange.
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