ConAgra Foods, Inc. (NYSE:CAG) Q4 2020 Earnings Conference Call - Final Transcript
Jun 30, 2020 • 09:30 am ET
confident in our ability to achieve our targeted net debt to trailing 12 months adjusted EBITDA leverage ratio of 3.5 times to 3.6 times by the end of fiscal '21. And importantly, we continue to remain committed to a solid investment grade credit rating.
In addition, we continue to remain open to smart divestitures that can help top line performance and generate cash flow to accelerate deleveraging. While we continue to evaluate portfolio actions, we will not pursue any divestitures that are not value-creating for the long term. As we approach our targeted leverage ratio, we continue to evaluate opportunities to use capital allocation to drive shareholder value.
Slide 44 outlines our guidance for the first quarter of fiscal '21 and our fiscal year '22 algorithm. We are expecting the elevated retail demand to continue into Q1, although at a lower rate than Q4, leading us to our Q1 organic net sales expectation of plus 10% to plus 13%. We continue to expect the favorable operating leverage from the elevated volumes in Q1 to offset the additional COVID related costs. Therefore, we expect adjusted operating margin to be in the range of 17% to 17.5%. These operating margin increases, coupled with expected improvement in our below the line items, lead to an expected EPS range for the first quarter of fiscal '21 of $0.54 to $0.59.
As I already mentioned, we remain confident in our ability to hit our leverage ratio target of 3.5 times to 3.6 times by the end of fiscal '21. And lastly, we are today reaffirming our fiscal year '22 algorithm, which is outlined on this slide and in the earnings release.
Thank you, everyone. That concludes my comments. I'll now pass it back to Sean.
Before we open up for Q&A, I'd like to say a few words about diversity and inclusion at Conagra.
We are deeply saddened by the recent events we've seen unfold across our nation. It's heartbreaking and unacceptable that racism and racial injustices continue to exist around the world. Our goal at Conagra is to work together in a constructive manner where everyone has a voice and has the opportunity to be heard.
D&I is not only part of our value system at Conagra, it's a business imperative. We serve a wide cross section of the population, and therefore it makes clear sense our organization represents the consumers we serve. D&I has always been a focus for Conagra Brands. But like many others, we can and we'll up our game. We are working with an external diversity and inclusion consultancy to help us identify specific opportunities that will have the most impact. We're also hosting listening sessions with employees throughout the organization.
Overall, we are determined to be part of the solution, and we look forward to continuing to share reports of our progress along the way.
Thank you. Now let's open it up to Q&A.