In the fourth quarter of fiscal year 2018 (Q4 FY18), Spectrum Brands’ pet food division reported that its earnings before interest, tax, depreciation and amortization (EBITDA) hit US$7 million, according to a press release from the company. The pet food division’s earnings resulted from lower-than-expected revenue and related unfavorable manufacturing variances as production volumes were reduced.
For fiscal year 2018, which ended on September 30, Spectrum Brands reported net sales of US$820.5 million, a 3.4 percent increase over fiscal year 2017’s net sales of US$793.2 million.
Fiscal 2018 organic sales growth was nearly 2 percent. The company stated that its two pet acquisitions performed very well, and that the U.S. pet business stabilized and has returned to growth.
Spectrum Brands owns Tetra fish food and products, Healthy Hide rawhide chews, Wild Harvest bird and small animal products, Marineland aquarium products and other brands.
Reasons for Spectrum Brands performance in Q4 FY18
Fourth quarter net sales decreased primarily as a result of lower aquatics revenues in the U.S. largely driven from prior-year business exits at a major retailer and in Europe from a temporary customer order backlog from the consolidation of European distribution centers which also negatively impacted branded dog and cat food sales.
Also contributing to the decline was a decrease in European dog and cat food sales from the planned exit of a pet food customer tolling agreement of US$4.0 million, which negatively affected segment sales by approximately 1.8 percent. Largely offsetting the decline was a strong increase in U.S. companion animal sales, predominantly dog chews and treats. Excluding the impact of unfavorable foreign exchange of US$0.9 million, organic net sales decreased 1.9 percent in the fourth quarter.
The operating loss and negative margin were primarily driven by the write-off from impairment of intangible assets. Adjusted EBITDA and margin decreased as a result of lower volumes, volume-related unfavorable manufacturing variances, operating inefficiencies and unfavorable product mix. Excluding unfavorable foreign exchange impacts of US$0.5 million, organic adjusted EBITDA of US$32.5 million fell 26.1 percent.
