By Sruthi Ramakrishnan
(Reuters) - Campbell Soup Co reported a smaller-than-expected quarterly adjusted profit due to a product recall as well as higher costs and lower sales of carrots, issues that the company expects will dent sales for the rest of the year.
The world's largest soupmaker also gave a full-year adjusted earnings forecast that fell short of analysts' estimates, sending its shares tumbling 6.5 percent to a more than six-month low on Thursday.
The company's problems in the quarter were centered around its Campbell Fresh business, which it has been boosting through acquisitions to cater to consumers' increasing preference for fresh and organic foods over processed foods.
Campbell Fresh operating profit plunged 62 percent in the quarter and sales fell 5 percent, hurt by a recall of protein drinks in June, higher carrot costs and lower sales of carrots and carrot ingredients – all in the Bolthouse Farms unit.
Campbell Soup said it harvested carrots – the best known products of Bolthouse – prematurely in spring. That resulted in smaller carrots, which led to dissatisfied customers and loss of business.
"The performance of our Campbell Fresh business, driven predominantly by execution issues, is disappointing," Chief Executive Denise Morrison said in a statement.
The management at Campbell Fresh had been reshuffled in the past several weeks and several senior managers, including the president of Bolthouse, had left, Morrison said on a conference call.
She added that Campbell Fresh would take time to regain the lost business, which would mean sales would fall slightly in the current quarter and the next.
Campbell Soup said it was improving oversight of the entire Campbell Fresh supply chain and that it had rectified the problems in its manufacturing equipment and process that led to protein drinks being spoiled and then recalled.
The net loss attributable to Campbell Soup was $81 million in the quarter due to a $141 million pre-tax impairment charge related to Bolthouse. The company earned $17 million a year earlier.
Excluding items, Campbell Soup earned 46 cents per share, below analysts average estimate of 50 cents, according to Thomson Reuters I/B/E/S.
Net sales dipped 0.35 percent to $1.69 billion, but was in line with analysts' estimates.
The company forecast adjusted earnings of $3.00-$3.09 per share for the year ending July, below analysts' estimates of $3.14. It forecast sales would be between flat and up 1 percent.
Campbell Soup shares were down 5.5 percent at $57.38, recovering after hitting a low of $56.76.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza)