Snyder’s-Lance CEO retires amid unsatisfactory results

Carl Lee Jnr, Synder's-Lance's CEO, has resigned suddenly, amid poor results for the first quarter of 2017. Pic: Snyder's-Lance

Snyder’s-Lance has announced the surprise retirement of CEO Carl Lee Jnr (56) amid disappointing performance results for the first quarter of 2017.

According to Alex Pease, executive VP and CFO, the company is “not satisfied” with its early 2017 performance and wants to “return the business back to more expected levels of profitability”.

Brian Driscoll, former president and CEO of Diamond Foods until its acquisition by Snyder’s-Lance for $1.9bn in February last year, will take over the role of interim CEO.

The US snack giant has announced it will launch a national search for a permanent replacement to Lee, who is vacating his seat after 12 years with the company. Lee served as president of Snyder's-Lance since December 6, 2010 and as its CEO since May 3, 2013.

The company saw its stock price dive on Monday by 15.4%, following the shock announcement. Prices closed at $33.76 per share.

No announcement was made whether the challenges will affect the $38 million expansion planned for the company’s manufacturing facilities in Charlotte.

Good growth counterpoised by high costs

At the announcement of the transition, Snyder’s-Lance also reported its preliminary unaudited financial results for the first quarter ended April 1, 2017.

The Kettle Chips, Snack Factory and Pretzel Crisps-maker experienced sales and market share growth for the majority of its categories, but it came at a higher cost than planned, said Pease.

He also said Snyder’s-Lance had increased investment in promotional and marketing spending last year that offset the benefits the Diamond Foods transaction could have delivered.

Snyder’s-Lance estimates revenue of $530m-$532m for the quarter, falling short of analysts’ consensus for $551.2m. Although an increase of 18%-29%, these figures benefitted from two additional months of contribution from Diamond brands.

If calculated on a pro-forma basis – as if the transaction were completed on January 1, 2016 – growth is only expected to be 1-3%.

Net income for the first quarter, excluding special items, is expected around $13m-$14m, or $0.13-$0.14 per diluted share.  

Adjusted EBITDA for the period is forecast in the range of $52m-$54m.

Full-year results revised

Based on the company’s performance to date, it also revised its previous full-year expectations, announced on February 13.

Net revenue is now expected to be between $2.2bn-$2.25bn (down from $2.25-$2.29bn); adjusted EBITDA to be between $290m-$315m (down from $330m-$345m) and capital expenditure between $75m-$80m (down from $90-R100m).

Upon commencement of his role as interim CEO, Driscoll said he plans to immediately diagnose the underlying drivers of the company’s margin and revenue performance.

Pease added the Charlotte-based company will move aggressively to improve earnings; specifically focusing on improving cost of goods productivity, net price realization, and accelerating its zero-based budgeting plans.

Final results for Q1 2017 are expected to be release on May 8.

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