TreeHouse Foods recently adjusted its full-year core profitability outlook as the food and beverage company's third-quarter results did not meet market expectations, primarily due to a product recall and volume declines. The company is now expecting adjusted earnings before interest, taxes, depreciation, and amortization of $335 million to $345 million for 2024, down from previous projections of $360 million to $380 million.
This downward revision highlights worsening consumption trends and softer product mix, alongside the effects of a voluntary recall of frozen griddle products. Last month, TreeHouse Foods initiated the recall of specific frozen waffle products from its Ontario facility due to concerns over food quality and safety that arose during a routine quality assurance test.
The facility is currently closed, with plans to resume production in the first quarter of 2025, as noted by Chief Executive Steve Oakland during an earnings call, referencing a Capital IQ transcript. For the ongoing year, the company now forecasts adjusted sales to fall between $3.37 billion and $3.4 billion, reflecting an annual decrease of 1% to 2%, which includes the estimated impact from the recall.
In August, prior sales expectations ranged from $3.43 billion to $3.5 billion. In the quarter that concluded in September, TreeHouse Foods recorded adjusted earnings of $0.74 per share, an improvement from $0.57 the previous year, but just below the consensus estimate of $0.75 as polled by Capital IQ.
Sales for the quarter decreased 2.8% to $839.1 million; however, when excluding the recall's effects, revenue stood at $854.4 million, falling short of the Street’s prediction of $874.4 million. The stock price experienced a significant drop of 16% during midday trading. The recall impacted the top-line by 1.4%, while volume and mix experienced a 0.8% decline, further affected by a negative $5 million to $10 million influence from Hurricane Helene disrupting distribution across the southeastern U.S.
Prices dipped by 0.5%. Oakland commented on the mixed results for the third quarter, stating, "Our third-quarter results were mixed, as a tough operating environment with softer consumer takeaway led to sales below our expectations." However, he expressed satisfaction with supply chain savings which contributed to margin improvement and profits falling within the expected range. Looking ahead, TreeHouse estimates adjusted sales between $900 million and $930 million for the current quarter, reflecting a potential annual drop of 1% or a modest growth of up to 2%.
The company anticipates organic volume and mix to show low-single-digit increases, while pricing may present a "slight drag." O'Donnell shared insights on the outlook for fiscal 2025, explaining, "Our current expectation is that growth from new business wins and strength in our broth business will likely be offset by the impact of our griddle recall and softness in recent consumption trends that are likely to persist." He added that the company would focus on supply chain enhancements and margin management to optimize costs and drive year-over-year EBITDA growth that does not heavily rely on top-line performance..