Conagra Brands (CAG) Q4 2024 Prepared Remarks earnings summary

Executive summary

• Achieved solid progress in fiscal 2024 despite a challenging consumer environment, with sequential volume improvement in domestic retail and strengthened share in frozen and snacks.

• Investments in brand-building and innovation contributed to record share levels in key categories, though pressured dollar sales.

• Gross margin expanded due to supply chain productivity, and the balance sheet was strengthened with a reduced net leverage ratio.

• Business is larger and more profitable than pre-COVID, with improved net sales, operating margins, and adjusted EPS over a two-year period.

• Q4 reported net loss was driven by $957 million in goodwill and brand impairment charges.

Financial highlights

• Fiscal 2024 organic net sales were $12.022 billion, down 2.1% year-over-year, with Q4 organic net sales at $2.901 billion, down 2.4%.

• Adjusted gross margin for FY24 was 27.7% (+58 bps YoY); Q4 adjusted gross margin was 27.6% (+62 bps YoY).

• Adjusted operating margin for FY24 was 16% (+34 bps YoY); Q4 adjusted operating margin was 14.8% (+22 bps YoY).

• Adjusted EPS for FY24 was $2.67 (-3.6% YoY); Q4 adjusted EPS was $0.61.

• Free cash flow for FY24 was $1.63 billion, up 157% year-over-year.

Outlook and guidance

• Fiscal 2025 guidance: organic net sales flat to down 1.5%, adjusted operating margin 15.6%-15.8%, adjusted EPS $2.60-$2.65.

• Expect 3% net inflation, $500 million in capital expenditures, and $350 million in productivity savings in fiscal 2025.

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

• Q1 expected to be the lowest for volume, top-line, and gross margin, with sequential improvement through the year.

• Interest expense for FY25 projected at $415 million.