Conagra(CAG) - 2025 Q4 - Annual Results

Financial Performance Overview CEO Perspective & Strategic Focus Fiscal 2025 was challenging due to inflation and supply, while fiscal 2026 strategy focuses on volume growth, supply chain, and cost management - Fiscal 2025 performance was impacted by higher-than-expected inflation, foreign exchange headwinds, and supply constraints[4] - The strategic focus for fiscal 2026 includes investing in frozen and snacks, prioritizing volume strength, improving supply chain resiliency, and disciplined cost management[4] Q4 & Full-Year FY2025 Key Results Conagra's Q4 and full-year FY2025 financial results showed declines in net sales and adjusted EPS, driven by lower organic sales, alongside cautious FY2026 guidance Q4 Fiscal 2025 Financial Highlights | Metric | Amount (USD) | Change | | :--- | :--- | :--- | | Reported Net Sales | $2.8 billion | -4.3% | | Organic Net Sales | - | -3.5% | | Reported Operating Margin | 11.5% | - | | Adjusted Operating Margin | 13.8% | - | | Reported Diluted EPS | $0.53 | - | | Adjusted EPS | $0.56 | -8.2% | Full-Year Fiscal 2025 Financial Highlights | Metric | Amount (USD) | Change | | :--- | :--- | :--- | | Reported Net Sales | $11.6 billion | -3.6% | | Organic Net Sales | - | -2.9% | | Reported Operating Margin | 11.8% | +467 bps | | Adjusted Operating Margin | 14.1% | -188 bps | | Reported Diluted EPS | $2.40 | +233.3% | | Adjusted EPS | $2.30 | -13.9% | - The 3.5% decrease in Q4 organic net sales was driven by a 1.0% negative impact from price/mix and a 2.5% decrease in volume[7] Detailed Financial Analysis Total Company Performance Analysis (Q4 FY2025) Q4 FY2025 net sales decreased 4.3% to $2.8 billion, with gross profit down 12.1% and adjusted gross profit down 10.7%, while SG&A expenses declined 17.2% - Q4 gross profit decreased 12.1% to $707 million, with adjusted gross profit down 10.7% to $717 million, primarily due to lower net sales and cost inflation[8] - Q4 SG&A expenses decreased by 17.2% to $333 million, primarily due to lower incentive compensation[9] - Net interest expense decreased by 2.8% to $102 million in the quarter, driven by a reduction in total debt[10] - Q4 net income attributable to Conagra Brands was $256 million ($0.53 per diluted share), with adjusted net income at $270 million ($0.56 per diluted share)[11] Segment Performance (Q4 FY2025) In Q4, most segments saw sales declines, including Grocery & Snacks and Refrigerated & Frozen, while the International segment was a bright spot with organic net sales growth and increased operating profit Q4 FY2025 Segment Performance | Segment | Net Sales | Net Sales Change | Organic Sales Change | Adjusted Operating Profit | Adj. OP Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Grocery & Snacks | $1.2B | -2.1% | -3.3% | $226M | -11.7% | | Refrigerated & Frozen | $1.1B | -4.4% | -4.4% | $171M | -10.1% | | International | $230M | -13.8% | +0.8% | $35M | +22.7% | | Foodservice | $280M | -4.0% | -4.3% | $32M | -20.8% | - The International segment's reported net sales decrease of 13.8% was primarily due to unfavorable impacts from M&A (-7.3%) and foreign exchange (-7.3%), masking a 0.8% increase in organic net sales[20][29] - The Foodservice segment's organic sales decline was driven by a significant 7.6% volume decrease, partially offset by a 3.3% price/mix increase[22] Financial Position and Capital Allocation Cash Flow and Debt Management For FY2025, Conagra generated $1.7 billion in operating cash flow and $1.3 billion in free cash flow, while reducing net debt by 4.4% to $8.0 billion FY2025 Cash Flow Summary | Metric | FY2025 (USD) | FY2024 (USD) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $1.7 billion | $2.0 billion | | Capital Expenditures | $389 million | $388 million | | Free Cash Flow | $1.3 billion | $1.6 billion | | Dividends Paid | $669 million | $659 million | - Net debt at the end of fiscal 2025 was $8.0 billion, representing a 4.4% reduction from the prior year[31] - The company's net leverage ratio (Net Debt to Adjusted EBITDA) was 3.6x at the end of the fiscal year[31][69] Dividend Information Conagra paid a $0.35 per share dividend in Q4 and approved an identical quarterly dividend, maintaining its commitment to shareholder returns - A dividend of $0.35 per share was paid during the fourth quarter[27] - The Board of Directors approved a subsequent quarterly dividend of $0.35 per share, payable on August 28, 2025[32] Fiscal Year 2026 Outlook FY2026 Guidance Conagra's FY2026 guidance projects organic net sales growth between -1% and 1%, with expected declines in adjusted operating margin and adjusted EPS ($1.70-$1.85) Fiscal 2026 Guidance | Metric | Guidance | | :--- | :--- | | Organic Net Sales Growth | (1)% to 1% | | Adjusted Operating Margin | ~11.0% to ~11.5% | | Adjusted EPS | $1.70 to $1.85 | | Interest Expense | ~$400MM | | Capital Expenditures | ~$450MM | | Free Cash Flow Conversion | ~90% | | Net Leverage Ratio | ~3.85x | - The fiscal 2026 guidance includes an expected $0.05 benefit to adjusted EPS from a 53rd week[37] Key Assumptions and Headwinds The FY2026 outlook assumes continued elevated inflation and macroeconomic uncertainty, with total COGS inflation projected at approximately 7%, including tariff impacts - Guidance anticipates core inflation to be approximately 4% in fiscal 2026[33] - The company expects an approximate 3% increase in COGS from U.S. tariffs on imported tin plate steel and aluminum[33] - Total expected cost of goods sold inflation is approximately 7% for fiscal 2026[33] Financial Statements Consolidated Statements of Operations The income statement shows FY2025 net sales decreased 3.6% to $11.6 billion, while operating profit and net income significantly increased due to the absence of prior year impairment charges Consolidated Statements of Operations (Full Year, in millions USD) | (in millions USD) | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net sales | $11,612.8 | $12,050.9 | | Gross profit | $3,003.5 | $3,333.4 | | Operating profit | $1,364.6 | $852.8 | | Net income attributable to Conagra Brands, Inc. | $1,152.4 | $347.2 | | Diluted EPS | $2.40 | $0.72 | Consolidated Balance Sheets As of May 25, 2025, Conagra's balance sheet shows total assets of $20.93 billion, total liabilities of $12.00 billion, and increased stockholders' equity Consolidated Balance Sheet Highlights (in millions USD) | Account (in millions USD) | May 25, 2025 | May 26, 2024 | | :--- | :--- | :--- | | Total current assets | $3,071.0 | $3,149.5 | | Total assets | $20,933.9 | $20,862.3 | | Total current liabilities | $4,317.0 | $3,241.8 | | Senior long-term debt | $6,234.1 | $7,492.6 | | Total liabilities | $12,001.2 | $12,351.0 | | Total stockholders' equity | $8,932.7 | $8,511.3 | Consolidated Statements of Cash Flows For FY2025, net cash from operating activities was $1.69 billion, decreasing from prior year, with significant cash used in investing and financing activities, including debt repayments and dividends Consolidated Statement of Cash Flows (Full Year, in millions USD) | Account (in millions USD) | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | $1,691.9 | $2,015.6 | | Net cash flows from investing activities | ($542.2) | ($375.0) | | Net cash flows from financing activities | ($1,158.3) | ($1,656.7) | | Net change in cash and cash equivalents | ($9.7) | ($15.6) | Reconciliation of GAAP to Non-GAAP Financial Measures Reconciliation of Organic Net Sales This section reconciles reported net sales to organic net sales, showing a 3.6% decrease in reported sales and a 2.9% decrease in organic sales for FY2025, with International as the only segment with positive organic growth FY25 Organic Net Sales Growth vs. Reported Net Sales Growth (%) | Segment | Reported Net Sales Growth (%) | Organic Net Sales Growth (%) | | :--- | :--- | :--- | | Grocery & Snacks | -1.2% | -2.0% | | Refrigerated & Frozen | -4.2% | -4.2% | | International | -11.3% | +0.5% | | Foodservice | -4.7% | -4.8% | | Total Conagra Brands | -3.6% | -2.9% | Reconciliation of Adjusted Operating Profit Reported operating profit is adjusted for non-recurring items to derive adjusted operating profit, which for FY2025 was $1.63 billion, a 15.0% decrease, with adjusted operating margin contracting to 14.1% FY25 Adjusted Operating Profit vs. Reported Operating Profit (in millions USD) | Metric (in millions USD) | FY2025 | FY2024 | Change | | :--- | :--- | :--- | :--- | | Reported Operating Profit | $1,364.6 | $852.8 | +60.0% | | Adjusted Operating Profit | $1,634.5 | $1,922.7 | -15.0% | | Reported Operating Margin | 11.8% | 7.1% | +467 bps | | Adjusted Operating Margin | 14.1% | 16.0% | -188 bps | Reconciliation of Adjusted Net Income and EPS This reconciliation adjusts reported net income and EPS, showing FY2025 reported diluted EPS at $2.40 (up significantly due to prior year impairment absence), while adjusted diluted EPS decreased 13.9% to $2.30 FY25 Adjusted EPS vs. Reported EPS (USD) | Metric (USD) | FY2025 | FY2024 | Change | | :--- | :--- | :--- | :--- | | Reported Diluted EPS | $2.40 | $0.72 | +233.3% | | Adjusted Diluted EPS | $2.30 | $2.67 | -13.9% | Other Reconciliations (EBITDA, Free Cash Flow, Net Debt) This section details key non-GAAP metrics for FY2025, including Adjusted EBITDA of $2.22 billion (down 10.5%), Free Cash Flow of $1.30 billion (down 20.0%), and a Net Debt to Adjusted EBITDA ratio of 3.60x FY25 Key Non-GAAP Metrics (Millions USD) | Metric (Millions USD) | FY2025 | FY2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $2,224.6M | $2,484.2M | -10.5% | | Free Cash Flow | $1,302.6M | $1,627.5M | -20.0% | | Net Debt | $7,999.6M | $8,363.6M | -4.4% | - The Net Debt to Adjusted EBITDA ratio for fiscal 2025 was 3.60x[69][70]