ConAgra Foods, Inc. (NYSE:CAG) Q1 2021 Earnings Conference Call - Final Transcript

Oct 01, 2020 • 09:30 am ET


ConAgra Foods, Inc. (NYSE:CAG) Q1 2021 Earnings Conference Call - Final Transcript


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David Marberger

continued to optimize our network and drive brand growth. This has led to our free cash flow increasing $39 million or 38% from the last year's first quarter.

As a result of our strong cash flows and progress reducing debt, we have greater financial flexibility to both invest in the business and return cash to shareholders. This, coupled with consistent successful execution of our strategic priorities and our ongoing confidence in the long-term strength of the business, led our Board to approve a 29% increase in the quarterly dividend to $0.275 per share or $1.10 per share on an annualized basis. This action is consistent with our commitment to maintaining a balanced approach to capital allocation. As we return cash to shareholders, we're also increasing our investments in the business as evidenced by the 36% increase in Q1 capex I just mentioned.

Turning to slide 42, you will find a summary of our outlook. As you've heard both Sean and me share this morning, we believe there is much to look forward to in the quarters ahead. However, the dynamics surrounding COVID-19 continue to make forecasting with specificity a challenge. What we can share is that we anticipate a continuation of elevated retail demand throughout the second quarter. We are therefore providing second quarter guidance, as noted in the release and on this slide.

We expect organic net sales growth of plus 6% to plus 8% in the second quarter. We expect adjusted operating margin in the second quarter to be in the range of 18% to 18.5%. Relative to Q1 operating margin, we expect less operating leverage benefit and we expect to increase our marketing support both above the line and below the line. We believe there are opportunities to increase brand-building investments where capacity permits. Given these operating margin factors, along with expected improvement in below the line items, we expect to deliver second quarter adjusted diluted EPS from continuing operations in the range of $0.70 to $0.74. We expect to reach our leverage target of 3.5 to 3.6 times by the third quarter of this fiscal year. Of course, our ability to achieve these targets assumes continued performance, end-to-end, by our supply chain.

Finally, we are reaffirming all of our fiscal '22 targets this morning. Note that the impact of the H.K. Anderson divestiture is small enough that we will not be adjusting our fiscal '22 EPS targets for the divestiture.

Thanks for listening, everyone. That concludes my remarks. I'll now pass it to the operator to open it up for questions.