By Alexander Marrow and Neil J Kanatt
July 15 (Reuters) – Conagra Brands is reviewing its non-core assets, the packaged food maker said on Wednesday, after it issued a weak profit forecast and halved its annual dividend amid pressure from higher costs and cautious consumer spending.
Packaged food makers like Conagra are under pressure as inflation-weary consumers turn to cheaper private labels, while the rapid adoption of GLP-1 weight-loss drugs shifts focus to healthier options. Higher commodity and packaging costs are also squeezing margins, forcing companies to explore newer growth areas or shed non-core assets.
“As we look at the portfolio, it’s been too large, it’s been too complex for too long,” said CEO John Brase, who took over from company veteran Sean Connolly in June.
Brase told Reuters that he would not walk away from Conagra’s three domains of frozen and snacking, which are its key growth drivers, and staples, its cash-generation arm.
The CEO, however, said brands that are not playing a great strategic role could be divested and others added, though “meaningful” acquisitions would not be executed until its debt-to-core-profit ratio is closer to 3 times, compared with 3.83 times as of May 31.
The company also posted a $1.62 billion quarterly loss, which included a $2 billion impairment charge tied to a sustained decline in its share price and market capitalization.
Shares of the Swiss Miss hot cocoa maker rose about 1%. They have fallen about 18% so far this year and are down about 65% over the last three years.
Conagra on Wednesday halved its annual dividend to 70 cents per share from $1.40, freeing up cash as the new management team steps up efforts to revive the business.
RBC Capital Markets, which had estimated that a 50% dividend cut would free up over $330 million in cash, said it was a step in the right direction, but there was still more work to do for Conagra to regain confidence.
“The first balancing act is this notion of volume versus margin,” Brase told Reuters, expecting to raise prices in the mid-single digits this fiscal year.
As part of his efforts to turn the company around, Brase said he would increase annual advertising spending by about 14%, acknowledging the company had underinvested in its brands.
He also said the company would take “inflation-justified pricing actions where necessary.”
The Hunt’s ketchup maker said it expects fiscal 2027 adjusted profit of $1.40 to $1.50 per share. Analysts on average were estimating earnings of $1.59 per share, according to data compiled by LSEG.
“The company will need to put points on the board with regard to demonstrating it can recover margins while also investing to stabilize organic sales before the market will give the company much credit for these actions,” BNP Paribas Equity Research senior analyst Max Gumport wrote in a note to clients.
Conagra expects annual organic net sales to decline between 1% and 3%, compared with a 0.4% decline in fiscal 2026. It posted fourth-quarter net sales of $2.88 billion, narrowly missing estimates.
(Reporting by Neil J Kanatt in Bengaluru and Alexander Marrow in London; Editing by Joyjeet Das, Diti Pujara and Anil D’Silva)
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