TreeHouse Foods is exploring a sale of all or part of the business

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The Illinois-based company – which operates in 29 product categories in two divisions (meal preparation and snacks and beverages) and operates 40 production facilities in North America and Italy – “has achieved a major transformation since 2018, improving the ability to support its private label clients and navigate a challenging operating environment», Declared the chairman of the board of directors Ann M. Sardini in a declarationReleased along with the company’s third quarter results.

The business split would involve the divestiture of part of its meal preparation business (which includes salad dressings, sauces, jellies, pasta and pickles) to allow it to focus on “higher growth“Snacks and drinks unit (cookies, frozen waffles, pretzels, snack bars and drinks and drink mixes),” Sardini said.

“These advancements and strong long-term trends in consumer demand for private labels provide a favorable backdrop as the board deeply examines and considers strategic options with a commitment to maximizing value for all shareholders. “

Workforce and supply chain woes: “We are getting creative …”

“We are creative in the way we employ and plan our factories, thinking holistically about how we expand our workforce, in order to improve footfall … On the production side, that includes us ensure we have back-up providers to prioritize our important SKU customers. On the transportation side, we have completed additional freight tenders and in some cases will use the spot market to make sure we can get inputs and finish the product in the right place at the right time.

Bill Kelley, CFO, TreeHouse Foods

“An increasingly difficult operating environment… ‘

TreeHouse reported a 5.3% increase in net sales to $ 1.1 billion for the three months to September 30 (Q3) thanks to acquisitions * and higher prices.

However, the volume / mix excluding acquisitions was unfavorable ”mainly due to the disruption of the supply chain causing supply shortages and declining service levels ”, CFO Bill Kelley said, while profit margins have shrunk due to inflation and supply chain issues.

Net income from continuing operations fell to $ 6.7 million in the quarter, from $ 11.4 million for the same period a year earlier, said Kelley, who downgraded the profit forecast from the company for the whole year.

We continue to work diligently to mitigate supply chain disruptions, and we are confident that we are implementing the necessary pricing measures to recoup higher input costs during the inflationary cycle. “

“As inflation continues, the cumulative effect of labor shortages and supply chain disruptions has created an increasingly challenging operating environment.“, added CEO Steve Oakland in prepared remarks.

CEO: “We have more demands than supply chain challenges allow us to meet”

Speaking on the third quarter earnings call this morning, Oakland said TreeHouse had about “$ 40 million in unmet demand [during the quarter] due to constraints on the network, either not being able to operate the lines due to lack of manpower, or because we did not have the appropriate supplies.

“The demand for private label products has grown in recent months to the point that today we have more demand than supply chain challenges allow us to meet. “

Almost all of the company’s meal preparation categories are currently on allocation, “A clear sign that orders are exceeding our disrupted capacity”, Oakland added. “Demand has grown since our last conversation and it’s very encouraging. As some federal stimulus programs expire, we see signs of a private label recovery. At the same time, we are gaining new business with existing customers.

Our Board of Directors and management team firmly believe that the age-old headwinds we face are episodic and will pass. “

Asked by an analyst about the potential sale of part of the meal preparation business, he said: “I wouldn’t be surprised at the transaction that would approach $ 2 billion. There are probably $ 2 billion companies that would provide a large-scale platform in the private label industry and allow us to. .. just move the strategy forward. “

* TreeHouse Foods has cut SKUs (and jobs) and reorganized its portfolio in recent years, acquiring the majority of Riviana Foods US-branded pasta business from Ebro for $ 242.5 million in December 2020 and by selling its ready-to-eat cereal business to Post Holdings for $ 85m in June 2021.


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