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UPDATE 3-Campbell Soup bets on price increases to drive up margins in H2

UPDATE 3-Campbell Soup bets on price increases to drive up margins in H2

reuters.com · 09/01/2021 07:23
UPDATE 3-Campbell Soup bets on price increases to drive up margins in H2

Adds CEO comment from earnings call, details on price increases

- Campbell Soup Co CPB.N said a rise in its product prices would drive its earnings margins in the back half of fiscal 2022, cushioning the blow from higher ingredients and freight costs that will likely plague packaged foods makers through the year.

The company's shares rose 4% on Wednesday as it also announced a new $500 million share repurchase program.

Packaged foods makers have been wrestling with higher costs of wheat and edible oils, while also spending heavily on transportation to ease the strain on their supply chains due to the COVID-19 pandemic.

To protect margins, General Mills Inc GIS.N and Conagra Brands Inc CAG.N have raised prices, with Campbell, which forecast full-year profit below estimates, set to increase prices in the first half of fiscal 2022 to counter a jump in steel costs expected in the latter half.

Steel is used in packaging its soup, whose demand, Campbell said, has been steady due to repeat orders from consumers. Campbell now looks to keep up sales level by modernizing packaging and launching new items.

"Part of the composition of the year is going to be a little bit of a tale of two halves," Chief Executive Mark Clouse told analysts, noting an expected improvement in sales in the second half from price increases of Campbell's products.

"With COVID resurgence, I think some of the consumer dynamics that supported demand is likely going to be with us for a while longer."

However, Campbell expects fiscal 2022 organic net sales in a range of 1% decline to a rise of 1%. The maker of Prego pasta sauces also forecast adjusted earnings between $2.75 and $2.85 per share, below Refinitiv IBES estimates of $2.87.

Net sales fell 11% to $1.87 billion in the fourth quarter ended Aug. 1, beating estimates of $1.81 billion. Adjusted per-share earnings of 55 cents also topped expectations.

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Krishna Chandra Eluri)