Del Monte’s Net Income Drops 66%

Del Monte Foods Co. saw rising steel and oil prices cut deeply into its fiscal fourth-quarter profit as the stalwart foods producer fell well short of analysts’ expectations.

The San Francisco company posted a 66% decline in profit when it reported net income of $19.3 million, or 9 cents a share, for the three months that ended May 1, compared with $56.6 million, or 27 cents, a year earlier.

Excluding charges from refinancing, operations integration and litigation, the company said it would have earned 23 cents a share.

Analysts surveyed by Thomson First Call expected adjusted earnings of 31 cents a share on sales of $892 million. Del Monte, the maker of Starkist Tuna and Kibbles ‘n Bits, also reported that sales fell 8% to $847 million.

The poor showing was because this year’s quarter was a week shorter than last year’s, and an “unfavorable product mix,” Del Monte said.

“We were negatively affected by lower volume resulting from higher than expected competitive activity in our pet products segment and from our strategic decision to reduce certain less-efficient promotional spending,” Chief Executive Richard G. Wolford said in the statement.

Analysts have predicted that skyrocketing oil prices would hit food companies hard. Higher fuel costs mean they pay more to transport their foods.

For the fiscal year, Del Monte had net income of $117.9 million, or 56 cents a share, down from $164.6 million, or 78 cents, in the previous year. Excluding items, the company would have earned 75 cents a share. Revenue increased 2% to $3.18 billion.