CHICAGO — The higher costs of meat, eggs, cocoa and sugar weighed on Conagra Brands, Inc.’s second-quarter results and were projected to continue to impact the business during the second half of the year and, possibly, into fiscal 2026. The pressure prompted management to lower its guidance for the rest of the fiscal year.

“On inflation, last quarter we told you we expected it to peak in Q2 and then fall in the second half, driven in part by lower costs on proteins,” said Sean Connolly, president and chief executive officer, during a Dec. 19 conference call to discuss second-quarter results. “Our latest forecast projects that relief on protein costs will be delayed until after the end of the fiscal year.”

Connolly added that cocoa and sweeteners make up a smaller portion of Conagra’s ingredients buy, and that the company will be raising prices to offset the higher costs of those ingredients.

“… but the bigger driver for us has been protein,” he said. “It’s meats, eggs — things like that. And we did anticipate that there would be inflation in the second half, but we anticipated that level of inflation would be lower.”

As a result, Conagra Brands specified that it expects fiscal 2025 organic net sales growth to be at the midpoint of its stated range of down 1.5% to flat versus fiscal 2024. The company also lowered its adjusted earnings per share guidance to a range of $2.45 to $2.50 per share, down from the previously stated range of $2.60 to $2.65 per share.

“As mentioned, we are taking limited pricing actions late in the third quarter to offset some inflation in cocoa and sugar, and we continue to expect our second-half volumes and organic net sales to improve versus the first half,” said David Marberger, chief financial officer. “We expect brand investments to continue, with price mix being a larger headwind in Q3 due to investment timing, which may make our overall organic sales progress in the second half non-linear.”

For the quarter ended Nov. 24, Conagra Brands earned $284.5 million, equal to 60¢ per share on the common stock, and flat when compared with the second quarter of fiscal 2024 when the company earned $286.2 million, or 60¢ per share.

Quarterly sales also were flat at $3.2 billion, essentially the same as the second quarter of fiscal 2024.

“… Economic pressures continue to shape consumer purchasing decisions,” Connolly said. “We’re still seeing value-seeking behaviors, with consumers prioritizing affordability and maximizing value.”

In Conagra’s Grocery & Snacks business unit, sales increased 2% to $1.3 billion when compared with the same period last year and reflecting a 1.2% increase in organic sales and a less than 1% increase from the favorable impact of mergers and acquisitions (M&A).

The increase in organic net sales was driven by a price/mix increase of 0.9% and a volume increase of 0.3%. Conagra gained volume share in the snacking and staples categories, including microwave popcorn, shelf-stable dinners and entrees, chili, and seeds, according to the company. The company’s Swiss Miss business was pressured.

“Our snacking portfolio continues to perform well, although rising cocoa prices, combined with delayed winter weather in many parts of the country, contributed to the Swiss Miss decline,” Connolly said. “When you exclude Swiss Miss, snacks volume increased 0.6% for the quarter.”

In the Refrigerated & Frozen segment, organic sales were flat at $1.3 billion as price/mix fell 1.9%, attributable to brand investments, according to the company. Business unit volume increased 1.9% on gains in frozen multi-serve meals, frozen single-serve meals and frozen vegetables.

“We continued to see strong improvement in Conagra's frozen consumption, as demonstrated in our Q2 volume sales …,” Connolly said. “And when we take a wider perspective … our Q2 volume sales growth continued to outperform the total edible category and the overall frozen department as well.

“This growth is driven by a return to convenience, contributing to strong volume share gains in single-serve meal brands like Banquet and Marie Callender’s, as well as increased share in Birds Eye Vegetables and our multi-serve meal brands.”

Sales for the International segment decreased 12.9% to $243 million in the quarter, reflecting an 8.4% decrease from the unfavorable impact of M&A; a 3.8% decrease from the unfavorable impact of foreign exchange; and a 0.7% decrease in organic net sales.

Foodservice segment sales decreased 0.9% to $292 million due to a 1% decrease in organic net sales and a 0.1% increase due to the impact of M&A.

For the first half of fiscal 2025, Conagra Brands has earned $751.3 million, equal to $1.57 per share, and up 24% when compared with the first half of fiscal 2024 when the company earned $605.9 million, or $1.27 per share. An income tax benefit of $210.4 million during the first quarter of fiscal 2025 contributed to the improved earnings during the period.