OAK BROOK, ILL. — Weaker-than-expected sales volumes in September combined with an asset impairment charge pushed TreeHouse Foods, Inc., into the red during the third quarter of fiscal 2019, ended Sept. 30.
The private label manufacturer recorded a loss of $177.8 million, which compared unfavorably with the same period of the previous year when the company earned $2.6 million, equal to 5c per share on the common stock.
Sales for the quarter fell to $1,057.3 million from $1,117.9 million the year prior.
The volume shortfall was 4.7% when compared to the third quarter of fiscal 2018, due primarily to declines in the company’s Meal Solutions and Baked Goods business units. Management said the decline was due to pricing actions taken in 2018.
“Although volumes tracked reasonably well in July and August, we had a rather material and unexpected reduction in September orders,” said Steven T. Oakland, president and chief executive officer, during a conference call with securities analysts on Nov. 7. Mr. Oakland called the September shortfall “transitory” and said October shipments “are pacing right where we have them planned.”
TreeHouse Foods also took an $88 million impairment charge during the quarter and wrote down the value of its packaged cookies and dry dinners businesses.
In Meal Solutions, the company’s largest business unit, sales fell 6.6% to $504.5 million during the quarter. Operating income fell to $60.4 million from $70.3 million the year before. The operating income decrease was due to higher operating costs, according to the company.
In Baked Goods, sales fell 6.7% to $77.1 million. Operating income rose to less than 1% due to pricing actions taken to recover commodity, freight and packaging inflation, the company said.
Beverage business unit sales fell less than 1% to $263.3 million. Operating income ticked down 1.1% to $122.8 million. Management said the business should see growth in the fourth quarter.
The company adjusted and lowered the bottom end of its sales guidance for the year. Sales are now expected in the range of $4.26 billion to $4.36 billion, and adjusted earnings per share are expected to be in a range between $2.30 and $2.50 per share.
“With regard to the top line, a rebound following decline in September orders did not materialize in October,” said William Kelley, interim chief financial officer. “The later Thanksgiving Day holiday may in part be a reason why customer orders were light, but we think it’s prudent to reduce the midpoint of our top-line expectations by $80 million.
“From an operational perspective, we believe the issues of Q3 are largely behind us, although we have assumed the operational variances of the third quarter do have some impact on Q4.”