Food Business News - Feb 07, 2006 - (Page 1)

FoodBusinessNews February 7, 2006 NEWS, MARKETS AND ANALYSIS FOR THE FOOD PROCESSING INDUSTRY ConAgra to sell some refrigerated meats businesses, simplify structure Soda makers seek new markets 16 Tyson slashes guidance 18 Flavor fusion 46 MARKET WATCH OMAHA - ConAgra Foods Inc. announced last week plans to divest most of its refrigerated meats businesses, including the Armour, Butterball, and Eckrich brands. In addition, the company detailed several changes designed to streamline its operating structure, including moving its Grocery Foods headquarters from Irvine, Calif., to Naperville, Ill., and further centralizing its shared services. "Our actions reflect our commitment to simplify operations and to concentrate in areas where we have the strongest competitive positions," said Gary Rodkin, ConAgra Foods president and chief executive officer. "They put us in a better position to execute and drive consistent and sustainable growth." The combined annual sales for the businesses being offered for sale are about $1.9 billion. The businesses include Armour meats and hot dogs, Butterball turkey, and Eckrich smoked sausages, hot dogs and lunchmeats. Luis Nieto, president of Packaged Meats and Deli, will continue to lead the combined meats business during the sale process, which is expected to take 10 to 12 months. This past July, ConAgra said weak profitability in its packaged meats operations contributed to a 21% plunge in the company's fiscal 2005 net income of $641.5 million, which was down when compared with net income of $811.3 million for fiscal 2004. In addition, on Jan. 13 Moody's Investors Service, Inc., New York, downgraded the long-term debt rating for ConAgra Foods to Baa2 from Baa1 for senior unsecured debt and assigned the company a "negative" rating outlook. The agency cited last year's difficulties in refrigerated meat, which accounted for a $150 million decline in operating income. Packaged meat products sold under the Healthy Choice, Hebrew National, Brown 'N Continued on Page 12 Facing cost pressures, Kraft expands restructuring program California 2005-06 avocado production expected highest since 1992-93. NORTHFIELD, ILL. - Confronted by a more difficult operating environment in 2005 than the company anticipated, Kraft Foods Inc. announced it will further restructure its operations. The plans were detailed as the company released financial results for the year. Net income of Kraft Foods in the year ended Dec. 31 was $2,632 million, equal to $1.55 per share on the common stock, down 1% from $2,665 million, or $1.55 per share, in 2004. Sales were $34,113 million, up 6%. "To aggressively reduce its cost structure," Kraft said it would expand its restructuring program that was part of its Sustainable Growth Plan. "While 2005 was a difficult year for Kraft and several of the challenges we faced will continue in 2006, I am pleased by our progress in many areas, particularly in our fourth-quarter U.S. market shares," said Roger K. Deromedi, chief executive officer of Kraft Foods. "The actions we've taken over the past two years have improved our brand value propositions and are enabling us to drive out costs even more aggressively." To the $1.2 billion restructuring program the company announced in January 2004, Kraft said it would add an additional $2.5 billion (pre-tax) program. The company said the expanded Continued on Page 15

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Food Business News - Feb 07, 2006