ConAgra Foods, Inc. (NYSE:CAG) Q4 2019 Earnings Conference Call Transcript

Jun 27, 2019 • 09:30 am ET


ConAgra Foods, Inc. (NYSE:CAG) Q4 2019 Earnings Conference Call Transcript


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Sean M. Connolly

is also a major factor in reiterating our earnings guidance and increasing our organic growth guidance for fiscal 2020.

Dave will provide more guidance information later. I'll wrap up by sharing some thoughts on our opportunities within plant-based meat alternatives. Now that we own Gardein, we are very well positioned to capitalize on the explosive growth in this exciting space. So before I jump into the details of the quarter, I want to frame-up the big picture.

Fiscal 2019 was transformative for us, and we made very good progress securing our foundation during the year. We significantly advanced the Conagra Way playbook by deploying our principles across the portfolio. Our principles dictate that it's important to be lean, so you can be agile but that you can't cut your way to prosperity. Growth is essential and not all growth is equal. The consumer has to be top of mind and innovation capability counts.

Fiscal 2019 also brought the launch of our largest innovation slate to-date. Along with an emphasis on supporting our brands with efficient marketing programs. As a result, you can see we've had sustained consumption growth over the past two years. We also delivered organic net sales growth for the second year in a row. Our disciplined approach to innovation and brand building, particularly across our Frozen and Snacking portfolios is paying off. The result has provided us with a rock solid foundation from which to deliver on our new long-term growth algorithm.

Our successful completion of the Pinnacle Foods acquisition during the year accelerated the next wave of change in Conagra. Pinnacle was an obvious fit that increased our scale, enhanced our Frozen platform and added leading iconic brands in attractive categories. We've made tremendous progress integrating the businesses, realizing synergies and positioning Pinnacle's big three brands for our return to growth. We also continued to reshape our overall portfolio for better growth and better margins during fiscal '19 by divesting non-core assets.

Let's take a closer look at the Pinnacle business. Starting with the integration on slide 9, we achieved a critical milestone at the end of the fiscal year. We successfully transitioned Pinnacle's Legacy order-to-cash and financial ERP systems onto Conagra's SAP platform. This took a tremendous effort by the integration team, and it went off without a hitch. In fact across the board, the integration continues to run smoothly and our synergy capture remains on schedule. Since the transaction closed in late October, we have recognized $31 million of synergies.

From a balance sheet perspective, I'm pleased to report that we remain on track with our deleveraging plan, having reduced debt by $450 million in the fourth quarter, and $886 million from the close of the acquisition through the end of the fiscal year. We remain fully committed to achieving our goal of a net debt to adjusted EBITDA leverage ratio of 3.6 times to 3.5 times in fiscal 2021 and maintaining a solid investment grade credit rating.

Turning to business performance, the Legacy