Conagra Brands (CAG) Q1 2025 Prepared Remarks earnings summary

Executive summary

• Net sales declined 3.8% year-over-year to $2.8 billion, with organic net sales down 3.5%; strong share gains in frozen and snacks were offset by a temporary manufacturing disruption at Hebrew National during peak season.

• Reported EPS rose 44.8% to $0.97, driven by a $210.4 million income tax benefit; adjusted EPS fell 19.7% to $0.53, reflecting lower operating profit and FX headwinds.

• Portfolio reshaping resumed with the acquisition of FATTY Smoked Meat Sticks, Sweetwood Smoke & Co., and divestiture of Agro Tech Foods Limited.

• Continued supply chain productivity initiatives and cost savings, with a target of $1 billion by fiscal year-end 2025.

• Guidance for fiscal 2025 reaffirmed, reflecting confidence in business momentum despite ongoing cost and demand challenges.

Financial highlights

• Q1 FY2025 net sales: $2.79 billion, down from $2.90 billion year-over-year; organic net sales declined 3.5%.

• Adjusted operating margin was 14.2%, down 244 basis points; adjusted gross margin was 26.0%, down 163 basis points.

• Adjusted EPS was $0.53, down from $0.66 a year ago; reported EPS was $0.97, up 44.8% due to a significant tax benefit.

• Free cash flow for Q1 FY25 was $136 million, down 54.8% year-over-year; net cash from operations was $269 million.

• Net debt reduced to $8.6 billion; net leverage ratio at 3.60x.

Outlook and guidance

• Fiscal 2025 guidance reaffirmed: organic net sales growth of (1.5)% to flat, adjusted operating margin of 15.6%–15.8%, and adjusted EPS of $2.60–$2.65.

• Volume and margin recovery expected to accelerate in the second half of the year.

• Free cash flow conversion targeted at ~90%; net leverage ratio expected at ~3.2x by year-end.

• Capital expenditures for FY2025 are estimated at $450 million; input cost inflation expected at 3.2%.

• No material impact expected on fiscal 2025 margin or adjusted EPS from Q1 M&A transactions.