The Marzetti (MZTI) Q4 2019 earnings summary

Executive summary

• Record FY19 net sales of $1.308B, up 7% YoY; excluding Bantam and Omni sales, growth was 5%. Foodservice organic growth and acquisitions drove gains, while Retail results fell short of expectations.

• The Better Food Company Growth Plan focuses on base-business growth, supply-chain cost reduction and complementary acquisitions.

Financial highlights

• Net sales rose to $1,307.8M from $1,222.9M; gross profit increased 7% to $326.2M.

• Operating income was $190.9M, up 11%; net income reached $150.5M, up 11%, and diluted EPS was $5.46 versus $4.92.

• Operating income included a $16.2M contingent-consideration benefit, reflecting a $17.1M fair-value reduction for Angelic; restructuring and impairment charges were $1.6M.

• Operating cash flow increased 23% to $197.6M; cash and equivalents ended at $196.3M.

Outlook and guidance

• FY20 Retail sales are expected to benefit from Bantam, licensed shelf-stable dressings and sauces, and planned product launches; Foodservice growth is expected from select national accounts, branded products, Omni and Bantam.

• FY20 capital expenditures are projected at $80M–$100M, including $33M remaining for the Horse Cave dinner-roll capacity expansion, expected to finish mid-2020.

• FY20 commodity, packaging and freight inflation is expected, with commodities and packaging the greatest headwinds; pricing, procurement and lean six sigma savings are expected to help offset costs.

• FY20 SG&A will include continued strategic investment, including ERP costs; Omni facility upgrades and operational improvement costs are expected through H1.