CONAGRA BRANDS INC. Q1 FY2025 earnings call

• Q1 marked progress with volume improvement in domestic retail, including strategic frozen and snack domains.
• Achieved four consecutive quarters of share progress, with ~71% of portfolio holding or gaining volume share.
• Foodservice margins sustained at pre-COVID levels via value-over-volume strategy.
• Supply chain productivity initiatives on track to deliver $1 billion in cost savings by fiscal 2025 end.
• Acquired FATTY Smoked Meat Sticks and divested Indian joint venture ATFL.
• Hebrew National manufacturing disruption led to 47% y-o-y revenue decline, impacting volume and organic net sales.

Organic net sales composition by segment: Grocery and Snacks delivered approx $1.2 billion in organic net sales, a decline of 1.9% y-o-y, primarily from lower volumes with slight price/mix decrease. Refrigerated and Frozen had net sales of approx $1.1 billion, down 5.7% y-o-y, impacted by Hebrew National manufacturing disruption; excluding Hebrew, down 3.6% with volume up 1.6% and price/mix down 5.2%. International saw organic net sales increase 3% y-o-y, driven by Global Exports. Foodservice was impacted by lower margin business exited and restaurant traffic softness.

• Reaffirmed fiscal 2025 guidance.
• Expect sequential volume recovery each quarter, with Q2 expected to show improvement in volume, topline, and margin compared to Q1.
• Full-year fiscal 2025 inflation forecast raised to ~3.2% of total cost of goods sold from ~3% originally projected, driven by proteins and sweeteners.
• No material impact from Q1 M&A transactions on fiscal 2025 margin or adjusted EPS, but expect ~$30 million decrease in reported net sales for remainder of fiscal year.
• Year-end net leverage target of ~3.2x assumes favorable free cash flow from improved working capital, lower capital expenditures, and favorable tax settlement.
• Full-year adjusted gross margin expected to be relatively flat vs fiscal 2024.

• Manufacturing disruption at Hebrew National hot dog plant during Q1, which led to lost sales, volume reduction, and impact on organic net sales.