ConAgra Foods Plans to Sell Businesses

By NELSON LAMPE Posted 17 March 2006 @ 01:47 am EET     Print     Reprint     E-Mail     Comments

OMAHA (AP) - Focusing on what it calls its "highest potential brands," ConAgra Foods Inc. said Thursday that it plans to sell its seafood and cheese lines in addition to the planned sale of its refrigerated meats businesses.

The company behind brands like Healthy Choice, Hunt's and Chef Boyardee also cut its dividend by 34 percent and said it would record an unspecified amount of restructuring charges over the rest of the year.

ConAgra said the restructuring costs would lower operating earnings until fiscal 2009, when it expects to return to current earnings levels.

Its shares tumbled 91 cents, or 4.5 percent, to close at $19.50 on the New York Stock Exchange after sinking to a new 52-week low of $18.85 earlier in the session.

The product and brand divestitures are part of a sweeping company effort to streamline its product line and its operations.

"It is essential that we increase our investments behind our highest potential brands, simplify our portfolio of businesses and build a high-quality earnings trajectory," said Gary Rodkin, president and chief executive officer. The divestitures will help the company pare costs "and return quickly to recent earnings levels, but with a significantly stronger foundation for future performance," he said.

The company said it would specify the amount and nature of the restructuring charges in its next earnings release, which is scheduled for March 23. The charges will be recorded during the remainder of fiscal 2006 and in future quarters. Some of the asset sales will result in gains, ConAgra said.

The quarterly dividend will be dropped to 18 cents a share, down from the 27.25 cent dividend it has paid since December 2004. The new dividend is payable on June 1 to shareholders of record as of May 1.

The seafood businesses contributed an estimated $350 million in sales during the 2005 annual year, said Tania Graves, senior director of public affairs for ConAgra. It produces shrimp and other breaded seafood products under the Singleton and Meridian names.

Graves said that a Tampa, Fla., operation employing 350 people will be sold.

The company already announced the pending sale of its imitation shellfish business, which includes the Louis Kemp brand, to Seattle-based Trident Seafoods Corp. Terms were not released. The sale includes a plant with 250 employees in Motley, Minn.

The sale of cheese lines includes two operations. One, in Mayville, Wis., employs 150 people and produces Country Line and Swiss Rose products. Its affiliated operation for warehousing, sales and finance is in Moonachie, N.J., and has 55 employees.

The cheese lines contributed $200 million in sales for calendar 2005, Graves said.

The proposed sale of the seafood and domestic and imported cheese businesses comes after ConAgra said in early February it would sell its refrigerated meats business, which includes the Armour, Butterball and Eckrich brands.

The seafood, cheese and refrigerated meats up for sale generated total annual revenue of $2.8 billion.

Why sell such revenue sources as part of the restructuring?

"Really what it is is focusing on businesses that are core to our strategic plan," Graves said. "These lines of businesses, although profitable ... would thrive better with a company that is more focused in those areas."

She cited the January sale of Cook's, a smoked-meat business, to Smithfield Foods Inc., which says it is the world's largest pork processor and hog producer. That sale included plants in Nebraska, Missouri and Kentucky and about 1,540 workers. The purchase price was not disclosed.

Graves said all the affected plants would maintain current operations until final deals are signed, their fates then up to the new owners.

ConAgra projected fiscal 2007 earnings between $1.10 to $1.15 per share, excluding items, and said it still expects to achieve year-over-year earnings per share growth in the second half of fiscal 2006. It did not disclose the expected size of the earnings increase.

Analysts' current 2007 forecast is $1.36 per share, the average estimate of nine analysts surveyed by Thomson Financial.