Conagra(US:CAG)2025-12-19 12:32Financial Performance - Net sales decreased 6.8% to $3.0 billion, with organic net sales down 3.0% due to flat price/mix and a 3.0% decrease in volume[5]. - Gross profit decreased 17.8% to $696 million, and adjusted gross profit decreased 17.1% to $698 million, primarily due to lower net sales and inflation in cost of goods sold[6]. - Reported diluted loss per share was $1.39, mainly due to non-cash goodwill and brand impairment charges, while adjusted EPS was $0.45[6]. - The company reported a net loss attributable to Conagra Brands, Inc. of $663.6 million, compared to a net income of $284.5 million in the prior year[54]. - Conagra Brands reported a net loss of $499.1 million for the twenty-six weeks ended November 23, 2025, compared to a net income of $751.4 million for the same period in 2024[57]. - The company experienced a 15.7% decrease in gross profit year-to-date, reporting $1,336.6 million compared to $1,586.0 million last year[55]. - The diluted earnings per share for the second quarter was $(1.39), compared to $0.59 in the same quarter last year[54]. - Adjusted net income for Q2 FY26 was $218.0 million, with diluted EPS of $0.45, down from $0.70 in Q2 FY25, reflecting a year-over-year decline of 35.7%[61]. - Adjusted YTD net income for Q2 FY26 was $407.2 million, with diluted EPS of $0.85, a decrease of 30.9% from $1.23 in Q2 FY25[62]. Segment Performance - The Grocery & Snacks segment net sales decreased 8.5% to $1.2 billion, driven by a volume decrease of 2.3%[11]. - The Refrigerated & Frozen segment reported an operating loss of $832 million due to goodwill and brand impairment charges, with adjusted operating profit down 35.6% to $128 million[14]. - The International segment net sales decreased 5.4% to $230 million, with a volume decrease of 6.4%[15]. - Organic net sales for Q2 FY26 decreased by 6.8% year-over-year, totaling $2,975.1 million, with significant declines in Grocery & Snacks and Refrigerated & Frozen segments[58]. - The Grocery & Snacks segment reported an adjusted operating profit of $231.2 million, reflecting a year-over-year decline of 21.8%[59]. - The Refrigerated & Frozen segment experienced an adjusted operating profit of $127.5 million, a decrease of 35.6% year-over-year[59]. - The International segment achieved an adjusted operating profit of $69.8 million, with a year-over-year decrease of 7.1%[60]. Cash Flow and Debt - The company generated $331 million in net cash flows from operating activities, down from $754 million in the prior year period[24]. - Net debt at the end of the quarter was $7.6 billion, a 10.1% reduction year-over-year, resulting in a net leverage ratio of 3.83x[25]. - The company experienced a cash flow from operating activities of $331.2 million for the twenty-six weeks ended November 23, 2025, down from $754.2 million in the prior year[57]. - Total debt decreased to $7,623.9 million in Q2 FY26 from $8,463.6 million in Q2 FY25, while net debt also reduced to $7,577.3 million from $8,426.2 million[63]. - The net debt to adjusted EBITDA ratio stood at 3.83 as of November 23, 2025[64]. Guidance and Future Outlook - The company reaffirmed its fiscal 2026 guidance, expecting organic net sales change of (1)% to 1% and adjusted EPS between $1.70 and $1.85[28]. - The company expects total cost of goods sold inflation of approximately 7% for fiscal 2026, driven by core inflation and tariffs[30]. - The company plans to focus on market expansion and new product development to drive future growth despite current challenges[58]. Impairment and Restructuring - Goodwill impairment charges amounted to $771.3 million, representing a 100% increase from the previous year when there were no such charges[54]. - Conagra Brands incurred goodwill and brand impairment charges totaling $968.3 million in Q2 FY26[59]. - The company reported an asset impairment charge of $975.0 million for the twenty-six weeks ended November 23, 2025, significantly higher than $87.6 million in the same period last year[57]. - Restructuring plans contributed $2.9 million to adjusted operating profit YTD, with a significant impact from legal matter recoveries of -$37.4 million[60]. - The company reported a restructuring plan expense of $2.5 million in Q2 FY26 YTD, down from $82.1 million in Q2 FY25 YTD[65]. Other Financial Metrics - Interest expense for the second quarter was $96.0 million, down 11.2% from $108.2 million in the previous year[54]. - Equity method investment earnings decreased by 33.5%, from $48.5 million to $32.2 million year-over-year[54]. - Year-to-date (YTD) reported gross profit for Q2 FY26 was $1,336.6 million, or 23.8% of net sales, down 266 basis points compared to the previous year[62]. - Year-over-year adjusted gross margin for Q2 FY26 was 24.2%, reflecting a decrease of 227 basis points compared to Q2 FY25[62]. - Free cash flow dropped significantly by 79.1% to $112.6 million in Q2 FY26 YTD from $538.8 million in Q2 FY25 YTD[63]. - Corporate hedging derivative gains for Q2 FY26 were $3.6 million, positively impacting adjusted net income[62]. - Advertising and promotion (A&P) expenses were $74.3 million for Q2 FY26, accounting for 2.5% of net sales, compared to 2.2% in Q2 FY25[61].