Melissa Napier from Conagra Brands thanks listeners for joining their earnings call and mentions that a separate Q&A session will be held later. She introduces CEO Sean Connolly and CFO Dave Marberger. The company will be discussing forward-looking statements and non-GAAP financial measures, and encourages listeners to refer to their filings with the SEC for risk factors and the Investor Relations website for reconciliations and comparability items. Sean Connolly then discusses the company's fourth quarter and fiscal '24 performance in the face of a challenging consumer environment, highlighting progress and positive impact from investments in consumer engagement and increased market share in frozen and snacks.

Despite challenging industry trends and a tough consumer environment, the company reported growth in adjusted gross and operating margins thanks to productivity improvements and strong free cash flow. They expect the next fiscal year to continue the transition to a normalized operating environment. Despite lower one year sales and EPS, the company has shown solid growth over the last five years.

The company's focus on investing in their brands has led to improved sales, operating margins, and EPS. They have also reduced their net leverage and demonstrated resiliency in their domestic retail business. Despite a challenging consumer environment, the company has seen strong improvement in volume consumption in their key domains of snacks and frozen. They have also gained significant market share in these categories and are performing well compared to their competitors. In their largest category, frozen single-serve meals, the company has seen positive results.

In the fourth quarter, our investments in frozen single-serve meals led to record share levels in the category, with volume sales outpacing the total category. Volume trends for Birds Eye frozen vegetables have also improved, and our snacks business saw strong momentum due to on-trend brands like Duke's, David, and Angie's BOOMCHICKAPOP. In the staples domain, volume sales improved in the second half, but supply chain disruptions affected certain products. Brand building investments also contributed to volume growth in refrigerated products.

In the upcoming fiscal year, the company plans to make strategic investments to stimulate volume recovery in staples. Despite a challenging macro environment, the company's innovation has been successful, with new products like Birds Eye culinary inspired products, Banquet Mega chicken filets, and Wendy's Chili performing well. The company also saw margin expansion and cost savings, and plans to continue delivering $1 billion in cost savings in fiscal '25. The company anticipates a gradual transition to a more normalized operating environment for consumers in the upcoming year.

The company expects their brands to continue benefiting from strategic investments and cost savings initiatives in the upcoming fiscal year. They project stable gross margins and strong performance from Ardent Mills, but anticipate a gradual decline in challenging macro trends. For fiscal ‘25, the company expects a flat to negative 1.5% organic net sales growth, a 15.6% to 15.8% adjusted operating margin, and an adjusted EPS of $2.60 to $2.65. Despite a difficult consumer environment, the company remains confident in their ability to drive volume improvement and margin expansion. In fiscal year 2024, the company made steady progress despite challenges, demonstrating the resiliency of their business.

The company's adjusted gross profit and operating profit improved despite lower sales due to strong supply chain productivity and cost management. Advertising and promotion expenses remained consistent with the previous year, while SG&A expenses were mostly flat. The company achieved an operating margin of 16% and EPS of $2.67 for the fiscal year. In the fourth quarter, organic net sales declined 2.4%, driven by a volume decline and price/mix reduction. However, there were positive results in the snacks and refrigerated and frozen segments, with increased investments leading to volume gains.

In the fourth quarter, declines in foodservice volume were driven by a slowdown in QSR traffic and efforts to eliminate low-profit business. However, the International business had a strong quarter with increases in both volume and price/mix. The company is confident that their investments in innovation, branding, and trade merchandising will continue to drive growth in the future. Adjusted gross margin improved, but there were increased investments in A&P and SG&A. In the Grocery and Snacks segment, adjusted operating margin improved due to pricing and insurance proceeds, while in the Refrigerated and Frozen segment, margin declined due to trade merchandising investments. International adjusted operating margins declined due to supply chain issues, but Foodservice margins improved due to discontinuing less profitable business.

The company's annual goodwill intangible impairment testing had a negative impact on reported profits in the Refrigerated and Frozen and Grocery and Snacks segments. This was due to higher interest rates, revised sales projections, and market multiple contraction. Adjusted EPS for the fourth quarter was $0.61, a decrease of $0.01 from the previous year. The decline in EPS for the full year was largely driven by additional interest expense, a reduction in pension income, and a decrease in earnings from the company's 44% joint venture ownership in Ardent Mills. The company also made progress in strengthening their balance sheet and improving cash flow, repaying a $1 billion senior note and reducing net debt by 8.5% from the previous year.

In fiscal year 2024, Conagra saw strong improvement in net cash flow from operating activities, with a net cash flow of $2 billion and free cash flow of $1.6 billion. This was achieved through reduced inventory balances and improved cash returns from Ardent Mills. The company also made progress in reducing debt and lowering their net leverage ratio, with a targeted ratio of 3.0 times by the end of fiscal year 2026. For fiscal year 2025, Conagra expects flat to 1.5% decline in organic net sales growth, with adjusted operating margin between 15.6% and 15.8% and adjusted EPS between $2.60 and $2.65. The company will continue to invest in volume and market share growth, with projected net inflation of 3%, capital expenditures of $500 million, and gross productivity savings of $350 million. The expected operating margin for fiscal year 2025 is 15.6% to 15.8%, slightly lower than the previous year due to higher SG&A expenses.

Conagra Brands expects to generate a free cash flow conversion of 90% and reduce their net leverage ratio to 3.2 times by the end of fiscal year 2025. They plan to resume share repurchases in fiscal year 2025 and anticipate a slow start in the first quarter due to brand building investments and wrapping up their highest top line quarter from the previous year. They expect sequential volume improvement in each quarter to meet their full year sales guidance. The company's Board of Directors has authorized the continuation of their annualized dividend rate and their targeted payout ratio.

This summary was generated with AI and may contain some inaccuracies.