TreeHouse Foods, Inc. (NYSE: THS) has released its financial results for the fourth quarter and full year ending December 31, 2024. Despite facing a challenging economic environment and supply chain disruptions, the company made progress in improving profitability, streamlining operations, and positioning itself for long-term growth.
Navigating a Challenging Year
Steve Oakland, Chairman, Chief Executive Officer, and President of TreeHouse Foods, acknowledged the difficulties of 2024 while emphasizing the company’s ability to execute key strategies and deliver improved financial performance.
“We closed a challenging 2024 with sequentially improved net sales trends, gross profit margin, and Adjusted EBITDA margin, all of which were in line with our updated expectations,” said Oakland. “Despite a slower macro environment and two significant supply chain issues, our teams made steady progress executing on our supply chain initiatives amidst a difficult consumer backdrop across food and beverage categories.”
Oakland outlined the company’s commitment to driving profitability, optimizing operations, and making strategic decisions to enhance margins.
“As a result, the board and management are executing a plan to drive a more profitable business through the organization, including making strategic decisions on margin management for both new and existing business, with a goal of prioritizing gross profit dollars. We are also focused on additional efficiency opportunities across the organization that, along with declining levels of capital expenditures as we complete growth-related investments, can drive improved profitability and cash flow. We believe these actions will position the business well in the near-term and provide the opportunity for significant operating leverage when our categories return to growth.”
Fourth Quarter 2024 Financial Highlights
Net Sales Performance
TreeHouse Foods reported net sales of $905.7 million for the fourth quarter of 2024, slightly down from $910.8 million in the same period of 2023, representing a decrease of 0.6%. The year-over-year change in net sales resulted from the following factors:
- Volume/mix was positively impacted by strong performance in multiple categories, including pretzels, in-store bakery, and cookies.
- Lost volume from the griddle product facility restoration following a recall offset some of the gains in other product categories.
- Commodity-driven pricing adjustments in select categories contributed to a slight decrease in overall net sales.
Gross Profit Improvement
Gross profit as a percentage of net sales increased to 19.5% in Q4 2024, compared to 16.7% in Q4 2023. This improvement of 2.8 percentage points was driven by:
- Execution of supply chain savings initiatives.
- A $10.0 million insurance recovery related to the broth recall.
- Lower commodity costs.
The company noted that the volume loss from the frozen griddle product recall partially offset some of these improvements.
Reduced Operating Expenses
Total operating expenses for Q4 2024 amounted to $96.4 million, down from $109.7 million in Q4 2023, reflecting a decrease of $13.3 million. The reduction in operating expenses was attributed to:
- Lower employee incentive compensation expenses.
- A non-recurring impairment charge recorded in Q4 2023.
- Reduced severance expenses.
- Lower freight costs.
- A decrease of $6.5 million in TSA (Transition Services Agreement) income due to the conclusion of certain TSA services.
Other Expense Declines
Total other expenses for Q4 2024 were $6.9 million, a significant improvement from $31.3 million in Q4 2023. The $24.4 million reduction was primarily due to:
- A favorable change of $34.3 million in non-cash mark-to-market impacts from hedging activities, largely driven by interest rate swaps.
- Unfavorable currency exchange rate impacts of $8.3 million between the U.S. and Canada.
- A $3.9 million decrease in interest income due to the repayment of the Note Receivable in Q4 2023.
Income Taxes
The company’s effective income tax rate was 20.2% in Q4 2024, significantly lower than the 40.7% rate in Q4 2023. The lower tax rate was primarily driven by:
- Changes in the amount of executive compensation that is not deductible for tax purposes.
- The jurisdictional mix of earnings impacting state income taxes.
Net Income and Adjusted EBITDA Growth
- Net income from continuing operations increased significantly to $58.7 million in Q4 2024, up from $6.4 million in Q4 2023.
- Adjusted EBITDA from continuing operations was $118.3 million, compared to $108.4 million in Q4 2023, marking an increase of $9.9 million.
- The rise in Adjusted EBITDA was primarily driven by the company’s supply chain savings initiatives.
Discontinued Operations
Net income from discontinued operations decreased by $1.1 million in Q4 2024 compared to Q4 2023. This was primarily due to a non-recurring gain on disposal adjustment of $1.1 million recognized in Q4 2023 related to the divestiture of the Snack Bars business on September 29, 2023.
Full-Year 2024 Financial Performance
Operating Cash Flow Strengthens
TreeHouse Foods reported a significant increase in net cash provided by operating activities from continuing operations, totaling $265.8 million in 2024, compared to $157.3 million in 2023. The $108.5 million increase in operating cash flow was driven by:
- Improved working capital management.
- Higher cash flows from accounts payable.
- Increased cash generated from the sale of receivables.
Strategic Share Repurchases
During Q4 2024, TreeHouse Foods repurchased approximately 1.7 million shares of common stock for a total cost of $61.0 million, excluding excise tax. Over the full year, the company repurchased 4.1 million shares, amounting to $149.7 million in total repurchases. At the end of Q4 2024, TreeHouse Foods had $393.5 million remaining under its share repurchase authorization.
