ConAgra Foods, Inc. CAG
Q4 2012 Earnings Call Transcript

Operator: Jason English, Goldman Sachs.

Jason English - Goldman Sachs: Lots of questions. I think I'll leave a few to people who are going to come after me and get into a couple of detailed things here. Gross margins in the Consumer Foods segment, were they up, down or flat this quarter?

Andre Hawaux - President, Consumer Foods: Jason, this is Andre. They were up this quarter.

Jason English - Goldman Sachs: So, the decline was primarily driven by Commercial Foods in Agro. Is that just a factor of the milling stuff you talked about?

Chris Klinefelter - VP, IR: Jason, this is Chris. You are talking about for the total company, our fourth quarter margins were up slightly year-over-year, all segments included. So, if you got a different number, we'll go ahead and talk about it offline.

Jason English - Goldman Sachs: Yeah. We do have a different number. So, I will circle back offline to try to get some of the adjustments corrected on that one. And last question, your acquisitions, are they margin accretive to your Commercial Food business or are they diluting the margins right now?

Chris Klinefelter - VP, IR: Jason, this is Chris. I believe you mean the Consumer Foods.

Gary Rodkin - CEO: Yeah, we would expect them certainly to be accretive to our products.

Jason English - Goldman Sachs: But to margins?

Gary Rodkin - CEO: Yes, there will be margins overtime. I don't have the details here sitting in terms of the pieces that fell into the quarter, but overtime that's the objective.

Operator: David Driscoll, Citi Investment Research.

David Driscoll - Citi Investment Research: I wanted to go back, Gary, onto the organic growth in Consumer Foods. So, it seems =like just from the guidance, it's very limited organic growth in Consumer Foods in F '13. Can you please spend a little bit more time and talk about why, and I did hear I guess at the end of the part of the script a fairly large increase in advertising. Is that the number one factor to call out here for the organic growth rate being, it's got to be embedded in the guidance at may be 1% of EPS growth, something like that?

John Gehring - EVP and CFO: Well, David in consumer, we clearly have talked about how volume will be modestly down this year, but it will improve as the year goes on and we overlap the pricing. Obviously, we've talked an awful lot about shopper behavior across the industry buying less units exacerbated by the significant price increases taken this year. And then in our case, we singled out Banquet moving over a $1 impacting volume to the tune of about 40% of our volume drop this year. But, those moves – those pricing moves are the right thing holistically, certainly from an overall financial standpoint. We're going to overlap those pricing actions, as we get through the year and eventually we'll also start to hopefully see consumers flatten out in terms of their behavior on what kind of inventory they're carrying and how they're managing their leftovers, that's going to flatten out over time. But, we're planning realistically and we're very, very confident in the algorithm. The margins will improve this year in consumer, because we clearly are going to have less severe inflation. We're moving more towards pull versus push and that's why you see us committing to a realistic increase in our marketing dollars. But overall, we feel very good about our Consumer Foods business. We will see some modest growth on the organic business side and we will get a good boost from our acquisitions.