Grass seed company's debt climbs 15 percent
as profit falls
By MATEUSZ PERKOWSKI
The corporate parent of the Pennington grass seed company has managed to increase sales for five consecutive quarters.
Central Garden & Pet, which also owns numerous home and garden brands, grew revenues 7 percent to more than $300 million in its most recent fiscal quarter, according to a financial document.
However, the quarter wasn't profitable for the California-based company.
Higher costs of raw materials and other factors contributed to a $13 million quarterly loss for the company, which is 40 percent more than a year ago, according to the filing with the U.S. Securities and Exchange Commission.
During its last fiscal year, Central Garden & Pet's net income fell nearly 40 percent, to about $28 million, even as its total sales grew from $1.5 billion to $1.6 billion.
In the past year, the company's total debt has climbed 15 percent, to more than $460 million.
Bill Brown, the firm's chairman and CEO, remained upbeat about the company's prospects during a recent conference call with financial analysts.
Central has undergone a "significant transformation," becoming an integrated company rather than a collection of separate "silos," he said.
Over the next three years, the company expects to reduce costs by about $120 million with measures like consolidating warehouses and "right-sizing" its workforce, executives said.
"Many of the actions we are now taking are expected to result in significant savings in future quarters," said Brown.
The company also aims to reduce its product lines by 30-35 percent by the end of 2012, depending on feedback from retailers, he said. "We believe there is ample opportunity in this area."
Commodity costs were a drain on the company's net income, with key materials for popular products like bird feed rising more than 50 percent, said Lori Varlas, the firm's chief financial officer.
"Our margins reflect continued high material costs," she said.