The Marzetti (MZTI) Q4 2021 earnings summary

Executive summary

• FY2021 net sales and gross profit reached records as Retail strength and a recovery in Foodservice outweighed pandemic-related operating challenges.

• Results reflected elevated at-home food demand, licensing growth and Foodservice recovery as restaurant restrictions eased; inflation, labor constraints and supply uncertainty grew late in the year.

Financial highlights

• FY2021 net sales rose 10% to $1.467B; gross profit increased 8% to $386.7M, while gross margin was 26.4% vs. 26.8%.

• Operating income increased 6% to $185.9M; operating margin was 12.7% vs. 13.2%. Net income rose 4% to $142.3M and diluted EPS was $5.16 vs. $4.97.

• Excluding Omni temporary-agreement sales, consolidated net sales increased 12%; sales grew 10% as reported.

• FY2021 included a $5.7M noncash, pretax benefit from lower Bantam contingent consideration and $1.2M in Bantam impairment charges.

• Project Ascent costs were $37.9M, reducing diluted EPS by $1.05; excluding these costs, SG&A was slightly above prior year.

Outlook and guidance

• FY2022 Retail faces tough comparisons with FY2021; licensing and new items are expected to support sales. Foodservice sales are expected to benefit from increased in-restaurant dining.

• Significant FY2022 inflation is expected in commodities, especially soybean oil, plus packaging, labor and freight; pricing actions and cost savings are expected to partly offset costs, with pricing benefits lagging inflation.

• FY2022 capital expenditures were projected at $170M-$190M, including about $105M for the Horse Cave dressing and sauce expansion, targeted for completion in FY2023 Q1.

• Project Ascent implementation was deferred to the start of FY2023 as priority shifted to servicing changing demand and business growth.