Sovos acquisition brightens Campbell Soup’s outlook

Early results for the Sovos Brands, Inc. acquisition pleased Campbell Soup Co. executives. They raised the company’s fiscal-year outlook for sales and adjusted earnings after Sovos boosted financial results in the third quarter ended April 28.
 
Net earnings of USD 133 million were down 17% from USD 160 million in the previous year’s third quarter. Net sales of USD 2.37 billion were up 6% from USD 2.23 billion, driven by the Sovos Brand acquisition. Organic sales were flat. While sales in Campbell Soup’s Meals and Beverages business, behind the Sovos Brands boost, increased 15%, sales fell 2% in the Snacks business.
“The integration of the Sovos Brands is off to a fantastic start and has already added significant incremental growth to our company in the third quarter,” said Mark Clouse, president and chief executive officer for Campbell Soup, in a June 5 earnings call.

 Campbell Soup completed its acquisition of Sovos Brands, which includes the brands Rao’s, Michael Angelo’s and Noosa, for about USD 2.7 billion in March.
“As Campbell’s FQ3 sales see positive growth driven by their recent purchase of Sovos Brands, our experts describe the acquisition as a very smart move by Campbell and will be a much-needed positive contributor to the meals portfolio as canned foods in particular continues to be a tough and challenging category to see growth in,” said John Oh, an analyst at global research firm Third Bridge, on June 5.

In Meals and Beverages, net sales in the third quarter increased to USD 1.27 billion from USD 1.11 billion. Organic net sales were comparable to the previous year’s third quarter as lower net sales of US retail products offset gains in foodservice. Within US retail products, gains in Prego pasta sauces and US Soup partially offset lower net sales in beverages, Campbell’s pasta and Swanson canned poultry.

The acquired business only contributed roughly seven weeks to the numbers, as the transaction’s closure was delayed until 12 March when an antitrust review was concluded successfully. Finance chief Carrie Anderson said that over the long term, Sovos Brands own net sales are likely to grow in the mid-single-digit range, with near-term insight for the coming financial year to be provided on the fourth-quarter call.
“We continue to expect the Sovos Brands acquisition to be nicely accretive to Campbell's organic revenue, adding over one percentage point to the overall company,” US investment bank Stifel analysts wrote in a research note.

To reflect the incorporation of Sovos Brands, Campbell upgraded its full-year guidance for reported sales to 3-4%, compared to the March outlook for sales to be down 0.5% to up 1.5%.

Sources: foodbusinessnews.net, just-food.com