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Packaged food maker ConAgra Foods posted better-than-expected third-quarter profit, as cost-cutting measures helped offset expenses from a peanut butter recall prompted by a salmonella outbreak.
The company also said it expects full-year profit to be at the high end of its previous forecast range.
ConAgra [CAG
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], which makes Orville Redenbacher's popcorn and Healthy Choice meals, said profit was $192.6 million, or 38 cents a share, for the fiscal third quarter ended Feb. 25, compared with a loss of $25.2 million, or 5 cents a share, a year earlier. The year-earlier loss includes a $122.9 million loss from discontinued operations.
Excluding costs from the peanut butter recall, earnings were 44 cents a share. On that basis analysts, on average, had forecast 35 cents a share, according to Thomson Financial.
U.S. health regulators said bacteria linked to contaminated peanut butter that has sickened hundreds of people had been traced to ConAgra's plant in Sylvester, Georgia. The company's lone peanut butter plant has been shut down since mid-February.
ConAgra, which made Peter Pan and the Wal-Mart Stores' [WMT
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] Great Value brands at the plant, first announced a recall of peanut butter on Feb. 14. The recall has since been expanded to include peanut butter products sold as early as October 2004.
Costs related to the recall are expected to be $50 million to $60 million, and $48 million in costs were recognized in the third quarter, the company said. The costs include product returns, inventory write-offs and legal costs.
ConAgra said it expects to resolve all claims relating to peanut butter "fairly and expeditiously" and it does not expect the costs of resolving the claims to materially affect future operating results.
Sales for the third quarter rose 2 percent to $2.92 billion, the company said. Analysts on average had forecast $2.82 billion.
For the full year, ConAgra said earnings should be at the high end of its previously forecast range of $1.28 a share to $1.33 a share, including costs of the peanut butter recall. Analysts on average have forecast $1.33 a share, excluding those costs, according to Thomson Financial.
ConAgra shares trade at about 16.8 times estimated earnings for fiscal year 2008, toward the low end of companies included in the Standard & Poor's Packaged Foods index.
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