Following the acquisitions of Green Giant from General Mills, Inc., the spices and seasonings business of ACH Food Companies, Victoria Fine Foods, and Back to Nature during the past three years, B&G Foods, Inc. has more than doubled the size of the company. The increased revenues from the new opportunities came through in their fiscal 2017 results, but so did inefficiencies in operations and weak performance in some product categories.

Net income for the year ended Dec. 31, 2017, was $217,463,000, equal to $3.27 per share on the common stock, up from fiscal 2016 when the company earned $109,425,000, or $1.73 per share. The strong earnings were a result of the U.S. Tax Cuts and Jobs Act passed in December, according to the company.

B&G Foods’ adjusted net income, which strips out the impact of the tax legislation, came in at $140.5 million.

Sales for the year were $1,668,056,000, an increase compared with $1,391,257,000 in the same period a year ago.

Yet it was the company’s quarterly results that got the attention of financial analysts who participated in a conference call with management to discuss results on Feb. 27. Specifically, sales for the quarter came in below expectations.

Net income for the fourth quarter was $120,908,000, equal to $1.95 per share, and an increase over the same period of the previous year when the company earned $13,568,000, or 20c per share.

Sales for the quarter were $473,684,000, up from $413,656,000.

Factors that hindered the company during the fourth quarter included rising freight and warehousing costs, the impact of a slower-than-expected sales finish in December, and increased marketing spending.

“Certainly, we expected as we came into the fourth quarter to have better results and kind of really drive some better margins there,” said Robert C. Cantwell, president and chief executive officer, during the conference call.

To offset the inflation in freight and some other commodities, B&G Foods has raised prices. Mr. Cantwell said he expected the first quarter of fiscal 2018 would be “muted” given the timing of the price increases, which he expects to begin hitting the profit and loss statement in the second quarter.

Another area of weakness for the company was its shelf-stable vegetable business, which features such brands as Green Giant and Le Sueur. Overall category weakness and the loss of a customer impacted performance. 

“ … We started experiencing those losses in the fourth quarter,” Mr. Cantwell said. “So that will continue through the next nine months of this year. And then in addition, consumption trends are just generally weak in the category. So, as we think about numbers and we build sales plans, we build plans that take those businesses down, I mean, the shelf-stable Green Giant business down further in 2018, which is a little bit offsetting. We have tremendous frozen growth that well achieve in 2018.”

This past November, B&G Foods hired Kenneth G. Romanzi as chief operating officer. Mr. Romanzi’s role is to help management remove operational efficiencies from its supply chain.

“ … The company has gotten so big so fast with so many different acquisitions and so many different types, whether it’s plants we acquired from Green Giant or Back to Nature, which came with 50 or 60 copackers,” he said. “… wher other companies spend years integrating things and spending time doing asset rationalization and logistics rationalization, we havent really done any of that. So, we think theres a pretty good runway of multiyear cost reduction programs to better align our manufacturing, warehousing and distribution …”

Mr. Cantwell added, “But 2018, were really looking at programs that are starting. As we speak, some things are easy to pick off. But there’s a number of things that are much larger cost savings projects, including distribution, consolidation, etc., that will extend way beyond this year.”

For fiscal 2018, B&G Foods is forecasting sales in the range of $1.72 billion to $1.75 billion and earnings per share to be in the range of $2.05 to $2.25.