TreeHouse(THS) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, adjusted net sales were $911.4 million and adjusted EBITDA was$118.3 million, both in line with expectations, reflecting almost 4% growth in the period [11][12] - For the full fiscal year 2024, adjusted net sales were $3.38 billion and adjusted EBITDA was$337 million, also meeting updated expectations [12][33] - Adjusted EBITDA margin rose to 13% in Q4 2024, driven by procurement savings [24] Business Line Data and Key Metrics Changes - Adjusted net sales increased by 0.2% year-over-year, primarily driven by a 3.8% increase in volume and mix, particularly in pretzels, in-store bakery, cookies, and broth [26] - The frozen griddle facility restoration negatively impacted sales by 2% [26] - Pricing adjustments due to commodity costs had a headwind of about 70 basis points [26] Market Data and Key Metrics Changes - Private brand unit sales experienced a sharp deceleration in Q4 2024, attributed to macroeconomic pressures affecting the broader food and beverage market [13] - Despite weaker consumption, private brands maintained market share, with promotional activity expected to increase due to industry volume softness [15][16] Company Strategy and Development Direction - The acquisition of Harris Tea strengthens the company's position in the private label tea category and enhances blending and sourcing capabilities [10] - The company plans to focus on supply chain performance and cost structure management to improve profitability and competitiveness [18][20] - A commitment to achieving $250 million in gross supply chain savings through 2027 is emphasized [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macro food environment and anticipates a flat top-line outlook for 2025, with adjusted net sales guidance of$3.34 billion to $3.4 billion [31][32] - The company expects a decline in organic volume mix of approximately 1$60 million in gross savings from supply chain cost-saving initiatives in 2024 [28][77] - Capital expenditures are expected to moderate moving forward as the company completes carryover projects from the previous year [30][79] Q&A Session Summary Question: What would you attribute the sequential slowdown in underlying volume to? - Management noted that the ramp-up of the broth facility and category deceleration contributed to the slowdown [43][44] Question: How does the company view the current industry challenges? - Management believes the current challenges are temporary and sees an opportunity to reset and rethink business operations [49][50] Question: Can you elaborate on margin management actions and their impact on volume? - Management indicated that margin management may lead to a slight volume drag but will improve cost efficiency [60][62] Question: What is the expected cadence of supply chain cost-saving programs in 2025? - Management expects a slightly lower contribution from procurement savings in 2025 but anticipates ongoing improvements in manufacturing and logistics [77][78] Question: How does the company plan to handle promotional activity in a low-volume environment? - Management expects promotional activity to increase as brands seek to drive volume, but believes the value proposition for private label remains strong [108][109] Question: What is the outlook for commodity inflation in 2025? - Management anticipates low to mid-single-digit inflation for commodities, particularly in coffee and cocoa [132][133]