Del Monte Foods’ Profit Jumps Sharply; Sales Forecast Raised

Del Monte Foods Co. said Thursday that fiscal fourth-quarter profit tripled, beating estimates, as price increases and cost cutting offset rising energy and packaging prices.

The San Francisco company also raised its long-term sales and earnings targets, even as it planned to cut 85 sales and administrative jobs.

Del Monte also said it would revamp its dry pet food manufacturing to lower delivery costs. In recent months, the company has overhauled its portfolio, acquiring the Meow Mix and Milk-Bone pet food brands and selling its soup and baby food businesses.

“That’s definitely something they need to do, especially picking up Milk-Bone and the Meow Mix businesses,” Morningstar analyst Gregg Warren said.

“They are trying to move away from a slower-growth, highly competitive, private-label canned goods business,” Warren added.

Del Monte said the costs of the overhaul would be $110 million over the next two years. In fiscal 2007, the maker of StarKist tuna and Del Monte canned fruits and vegetables expects to take 11 cents to 14 cents a share in charges related to the plan.

The company said profit for its fourth quarter ended April 30 was $57.9 million, or 29 cents a share, up from $19.3 million, or 9 cents, a year earlier.

Excluding gains from the business sales and other special items, earnings were 23 cents a share, 3 cents a share better than the average forecast of analysts polled by Reuters Estimates.

Sales rose 3.2% to $799.2 million, helped by new products including StarKist tuna fillets. The company had forecast an increase of 1% to 3%.

In addition to the job cuts and the pet food overhaul, Del Monte said it would upgrade its systems for tracking promotional spending and take steps to get new products to market faster.

For 2007, the company forecast a 14% to 16% sales increase, driven by acquisitions, and earnings of 53 cents to 58 cents a share from continuing operations, including charges for the transformation plan and integrating acquisitions.

Del Monte shares rose 29 cents, or 3%, to $11.59.