OAK BROOK, ILL. — TreeHouse Foods Inc. unveiled a broad plan to boost profitability in reporting 2024 fourth-quarter and fiscal year earnings that fell short of Wall Street’s consensus forecast.
And in an update, the private label food manufacturer said its Brantford, Ont., facility involved in a sweeping recall of frozen waffle and pancake products, due to potential Listeria monocytogenes contamination, resumed shipping in the 2025 first quarter.
“As to how we plan to manage the business in 2025, which incorporates challenging macro food trends and slower category growth, we will continue to focus on what we can control as an organization, primarily the performance of our supply chain and our cost structure,” Steven Oakland, chairman, president and chief executive officer, told analysts in a Feb. 14 conference call. “While we have made progress in improving our operations, we still have a significant opportunity to improve our execution and consistency.”
TreeHouse’s plan on the supply chain side includes the continued implementation of the TreeHouse Management Operating System (TMOS) and efforts to sharpen procurement and its logistic and distribution network. Meanwhile, the Oak Brook-based company aims to bolster margin management via capacity allocation and pricing architecture initiatives.
“We have visibility to delivering our commitment of $250 million of gross supply chain savings through 2027,” Oakland said. “We are focusing on optimizing costs across our supply chain network to drive improved profitability. I’m confident that through our margin management function we can improve the profitability of our current business as well as sharpen our competitiveness as we work to win new business this year. We will allocate our supply chain capacity to the most attractive mix of opportunities to best drive profitability for both Treehouse and our customers.”
Challenges at the bottom line
Net income in the year ended Dec. 31, 2024, totaled $26.9 million, equal to 51¢ per share on the common stock, down from $53.1 million, or 94¢ per share, in fiscal 2023. Adjusted net earnings were $100.5 million, or $1.91 per share, versus $139.2 million, or $2.47 per share, a year ago. Analysts, on average, had projected adjusted earnings per share of $1.96, though TreeHouse hit their low-end estimate of $1.91.
Fourth-quarter net income climbed to $58.7 million, or $1.15 per share, from $7.5 million, or 14¢ per share, a year earlier. Adjusted EPS was $48.6 million, or 95¢ per share, up from $42.8 million, or 77¢ per share, in the prior-year period. The quarterly result topped Wall Street’s bottom-end estimate of 93¢ but came in below the consensus estimate of 97¢.
TreeHouse noted that the full-year and quarterly earnings reflect the impact of the October 2024 griddle products recall and the September 2023 broth recall; growth, reinvestment and restructuring costs; acquisition, integration, divestiture and related expenses; impairment costs; and mark-to-market adjustments.
“We have a good line of sight to some additional near-term opportunities to drive net sales and cash flow,” Oakland said.
“First, we have the opportunity to improve the production efficiency at our Cambridge (Md.) facility, which despite significant improvement in 2024 is still not yet in line with our long-term expectations,” he explained. “Second, we are on our way to a resolution of the frozen griddle recall that is impacting our first half, with the glide path progressing as planned. Third, our coffee business will begin to realize cost synergies this year as we complete the needed investments in the facility that we acquired, which should bolster our coffee margin capability. And finally, our level of growth for capex is going to moderate moving forward as we complete some carryover projects from last year.”
With the mid-October griddle products recall, TreeHouse temporarily shut the Brantford plant “to conduct the deep cleaning, sanitation and hygienic restoration,” Oakland said.
“The facility resumed shipping products in recent weeks, in line with our expectations,” he said. “We anticipate no significant financial contribution from griddle in the first quarter.”
Volume lift at year-end
TreeHouse’s sales were down for the 2024 full year and fourth quarter, though the quarterly result showed an uptick on an organic basis.
Fiscal 2024 net sales fell 2.3% to $3.35 billion from $3.43 billion in 2023. Organic net sales were down 1.7% on a 0.1% dip in volume/mix, a 1.7% decline in pricing, decreases of 0.6% from product recall returns and 1.5% from facility restoration, and a 1.7% lift from a business acquisition.
“We delivered flattish volume and mix for the year despite our supply chain challenges,” Oakland said.
In the fourth quarter, net sales declined 0.6% year over year to $905.7 million from $910.8 million. Organic net sales inched up 0.2% on 3.8% growth in volume/mix and a 0.7% decrease in pricing, partially offset 0.8% by product recall returns and 2.8% for facilities restoration.
Strong performances by eight of TreeHouse’s top 10 product categories — led by pretzels, in-store bakery, cookies and broth — helped drive the gain in volume/mix, chief financial officer Patrick O’Donnell told analysts.
“We drove an improvement in our volume and mix and posted almost 4% growth in the period,” O’Donnell said. “Amidst voluntary recall-related disruptions in our supply chain, we executed well to achieve significant cost savings, securing anticipated procurement savings, which provided the benefits we expected this quarter.”
However, Oakland cited a “rather sharp deceleration during the quarter” in private brand unit sales.
“We believe this slowdown was a result of continued macro pressure that has impacted the broader food and beverage market,” he said. “We’re experiencing similar trends thus far in Q1, and we have planned our 2025 business accordingly. Despite the macro trends, I am pleased to report that overall private label industry dynamics remain favorable. Price gaps are healthy and maintain their historical cadence during the holiday period. Despite weaker consumption, private brands maintain share.”
TreeHouse has prepared for more pressure from an expected increase in industry promotional levels, Oakland added.
“We once again saw the traditional pattern of gradual increases as the calendar year progressed,” he said. “Looking ahead, we believe an increase in promotional activity is likely. Given industry volume softness and overall consumption patterns, we have planned accordingly. Promotions are generally still below the historic levels seen prior to the pandemic, and we remain comfortable with the expected levels of promotions in our categories.”
TreeHouse expects its early January acquisition of Harris Tea to make the company a stronger private label coffee and tea manufacturing partner to retailers.
“The transaction strengthens our competitive positioning in the fast-growing private label category and adds unique blending and sourcing capabilities that customers desire,” Oakland said.
For fiscal 2025, TreeHouse forecasts adjusted net sales of $3.34 billion to $3.40 billion, representing a 1% decline to a 1% gain. Its guidance also projects adjusted EBITDA of $345 million to $375 million, which would mark 2% to 11% growth from $337.4 million in 2024.