Campbell Soup Company (NYSE:CPB) Q4 2019 Earnings Conference Call Transcript

Aug 30, 2019 • 08:30 am ET

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Campbell Soup Company (NYSE:CPB) Q4 2019 Earnings Conference Call Transcript

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Presentation
Executive
Mark A. Clouse

to sustainable profitable growth. We have demonstrated improved operating discipline and this marks the fourth consecutive quarter this year that we have met or exceeded our own financial goals. It also marks the first quarter we delivered topline, gross margin and EPS growth in the year. Definitely a great way to finish.

Second, we are well on our way to completing the divestitures of the non-core businesses we identified last year, shedding the underperforming Fresh businesses that added complexity to the portfolio and working toward closing on the two transactions related to Campbell International, both of which are expected to close in the first half of fiscal '20. This will do two critical things; it will improve our balance sheet and better focus of the business. In total, we expect net proceeds of approximately $3 billion from these transactions, which will be used to significantly reduce our debt.

Finally, we've also developed a new straightforward strategy, which brings clear focus on one geography and two core businesses. It's a simple, yet powerful concept that enables us to concentrate our resources and investment on the things that matter most. This includes returning resources and innovation to our iconic meals and beverage brands like our Campbell Soup business, and accelerating support on our unique and differentiated snacking portfolio, including the Pepperidge Farm and Snyder's-Lance brands.

We have accomplished a great deal this year, and I'm very satisfied with our progress. We have clearly stabilized the Company from where we were a year ago and delivered improved performance over the course of the year. By no means are we declaring victory. We have much to do to continue to strengthen our businesses, improve our marketing and innovation and demonstrate executional excellence consistently. However, the actions we have taken have removed a great deal of unpredictability around our business and created a solid foundation to build upon going forward.

Now let's cover Q4 in more detail on Slide 6. This is the best quarter we have delivered in terms of performance versus prior year and provide some encouragement for the potential of our new focused portfolio, demonstrating what the business is capable of delivering. Looking at our combined results in the quarter, sales increased 2%, performance in the quarter reflected continued strength in the Snacks segment where organic sales increased 4% with contributions coming from across the business. In fact, we grew or held share in eight of our top nine Snack power brands.

Meanwhile, the Meals & Beverage business continued to stabilize, delivering 1% organic sales growth. We also made progress on gross margin in the quarter. Another important proof point in our turnaround. Adjusted gross margin increased 60 basis points in the quarter. A material improvement versus the third quarter year-to-date, which was down significantly.

We have also continued to successfully deliver our multi-year enterprise cost savings program. This quarter, we achieved $45 million in savings, including the Snyder's-Lance synergies. For the year, that brings our total savings to $165 million from