OAK BROOK, Ill. (AP) — Shares of Treehouse Foods Inc. fell Wednesday after the company cut its forecast for the year and said it was shutting down two plants in part because of declining soup sales.
The Oak Brook, Ill.-based company, which sells private-label foods to grocers, said its profit rose 36 percent in the second quarter as it cut costs, hiked prices and benefited from its acquisition of Naturally Fresh, which makes dressings and sauces.
But the company said it now expects its full-year adjusted income of $2.75 to $2.90 per share, down from its previous forecast of $3 to $3.15 per share, as a result of declining soup sales. Analysts surveyed by FactSet expect earnings per share of $3.09 per share, on average.
The company said a soup plant in Mendota, Ill., which has 115 employees, is expected to fully shut down by the second quarter of next year. The cost to close the plant is estimated at $17.7 million, or 33 cents per share. A salad dressing plant in Ontario, Canada, which has 180 employees, is expected to close the following quarter at a cost of $17.3 million, or 33 cents per share.
For the three months ended June 30, the company earned $19.5 million, or 53 cents per share. That's compared with $14.3 million, or 39 cents per share, in the year-ago period.
Excluding one-time items, such as acquisition costs, the company said it earned 60 cents per share. That beat analyst expectations of 58 cents per share, according to FactSet.
Higher prices and the acquisition of Naturally Fresh helped lift sales 7 percent to $527.4 million. Selling, distribution, general and administrative expenses eased 15 percent to $56.6 million as a result of a warehouse consolidation program and lower incentive-based compensation for employees.
In the North American retail grocery unit, the company said net sales rose 5.9 percent primarily as a result of price hikes and the Naturally Fresh acquisition. Volume was down, however, as a result of declines in powdered drinks and soups. Operating margins fell to 14.8 percent, from 15.4 percent, as a result of higher costs for ingredients.
In the Food Away From Home unit, sales rose 11 percent as a result of price hikes and the acquisition. Volume fell by 3.7 percent, as a result of continued weakness in sales of pickles and Mexican sauces.
Sales for the industrial and export unit rose 8.7 percent as a result of higher prices and volume.
Shares fell 8.6 percent, or $4.75, to close at $50.77.