AdvancePierre Holdings, Inc. had an eventful 2016: making an initial public offering, acquiring Allied Specialty Foods and naming a new president. More mergers and acquisitions may come in 2017.
“In terms of M&A acceleration, I think now that we have an engine in place, particularly around cost containment, a solid engine in place around growing the business, and much of the heavy lifting of becoming a public company behind us, we will absolutely look to accelerate M&A,” said Christopher D. Sliva, president of AdvancePierre Holdings, Inc., in a March 9 earnings call. “We're convinced that the pacing item here is more about our own ability to integrate acquisitions than it is any constraints from our balance sheet, and our intention is to see whether or not we can't ramp that up.”
Sliva, who became president of AdvancePierre in November, said he has seen a trend occurring in the food industry.
“Flat has become the new normal for now,” Sliva said.
Understandably then, executives of the Cincinnati-based company were pleased with results from the fourth quarter and full year ended Dec. 31, 2016.
Full-year net income of $136,288,000, or $1.90 per share on the common stock, was more than triple the net income of $37,111,000 or $0.57 per share, in the previous fiscal year for the national producer and distributor of sandwiches, sandwich components and other entrees and snacks. Adjusted net income of $124,443,000, or $1.73 per share, was up 86 percent from $66,847,000, or $1.01 per share. Net sales fell 2.7 percent to $1,568,259,000 from $1,611,611,000.
“Pockets of profitable growth can be found through product development that matches customers' and consumers' increasingly personalized requirements,” Sliva said. “At the same time, suppliers must be diligent in eliminating the costs of excess complexity that neither customers nor consumers are willing to fund. APF has put a solid growth engine in place to balance both of these essential elements of success in today's challenging food markets.
“In our base product lines, we have both the resources to rapidly develop and launch new products, combined with the depth and breadth of customer relationships, to execute a series of wins, that when aggregated, make up the steady growth spelled out in our long-term algorithm,” Sliva said.
Burgers and stuffed entrees helped to drive growth in the fourth quarter, he said.
“We certainly expect over time that breakfast sandwiches and other things like PB and J, as we ramp up distribution, will provide us meaningful growth,” he said.
AdvancePierre stock started trading on the New York Stock Exchange on July 15, 2016, opening at $23.50 per share. The stock closed at $29.32 per share on March 9.
The company in October of 2016 completed the acquisition of Allied Specialty Foods, Inc., a manufacturer of raw and cooked beef and chicken Philly steak products.
AdvancePierre in fiscal-year 2017 expects adjusted EBITDA of $315 million to $325 million and net sales in the range of $1.64 billion to $1.67 billion, including organic volume growth of 2 percent to 3 percent in AdvancePierre’s three core segments and a full year of the Allied Specialty Foods business.
Sliva said AdvancePierre will close its smallest plant in Enid, Oklahoma, and move production to another facility on the Enid campus in 2017. Ongoing productivity efforts in Enid allowed the company to free up excess capacity and enabled the consolidation.
All four segments of AdvancePierre reported an increase in operating income in 2016.
Operating income of $168,266,000 in Foodservice was up 25 percent from $134,287,000 in the previous fiscal year. Net sales of $849,933,000 were down 4.1 percent from $886,095,000. Chains in the foodservice business continued to be a challenge, Sliva said.
“Our hope is, and our belief is, that as we get Allied fully integrated, that will give us another tool in our arsenal, if you will, to go chase Philly cheesesteak business within the chain segment,” he said. “But clearly, that is the part of the business that remains weak for us, both from the marketplace trends and our own distribution base, and a place that we will be looking to turn things around, as 2017 progresses.”
The Retail segment had operating income of $38,331,000, up 34 percent from $28,543,000. Net sales of $409,612,000 were up 3.4 percent from $395,941,000.
“Retail segment growth was most significant in club stores, where we saw strength in high margin stuffed chicken entrees and launched a new flame-grilled burger sandwich component, as well as in our value-oriented dollars store channel,” Sliva said. “Convenience segment growth was primarily driven by strong sandwich sales across C-stores and vending channels, as well as a continued rollout in the new flame-grilled burger component from a major C-store operator.”