CHICAGO, ILLINOIS, US — After softening in the first quarter, Ardent Mills earnings rebounded in the second, according to information in a Form 10-Q filed Jan. 4 by Conagra Brands, Inc., with the Securities and Exchange Commission. Conagra said higher earnings were generated at Ardent Mills despite weaker volumes.

Conagra had equity method investment earnings of $54.3 million in the quarter ended Nov. 26, 2023, up 10% from $49.3 million in the second quarter a year earlier and more than double the $22.5 million in equity method investment earnings Conagra reported in the second quarter of fiscal 2023. Second-quarter equity method investment earnings at Conagra, which holds a 44% stake in Ardent Mills, were up sharply from $35.5 million in the first quarter of this year but fell short of the record $63.5 million in the fourth quarter of fiscal 2023.

Year-to-date equity investment earnings at Conagra were $89.9 million, down 9% from $98.5 million during the first half of fiscal 2023. In the first half of fiscal 2022, equity method earnings were $49.7 million.

Conagra said Ardent Mills managed to generate higher earnings despite weaker sales, potentially suggesting continued softness in US flour milling volumes into the final quarter of calendar 2023.

“Ardent Mills earnings for the second quarter of fiscal 2024 continued to reflect slightly lower volume trends as seen throughout the industry but were more than offset by improved product margins,” Conagra said in the filing.

In a call with investment analysts Jan. 4, Conagra executives said its Ardent Mills investment represented a counterbalance to weakness the company was experiencing in its operating business due to persistently thrifty consumer behavior. The company’s operating profit fell 9% and adjusted EBITDA decreased 7% with weaker adjusted gross profit “partially offset by an increase in equity earnings driven by continued strong operating performance in our Ardent Mills joint venture,” said David S. Marberger, executive vice president and chief financial officer at Conagra.

Earnings per share similarly were down 12% with Ardent Mills again cited as a partial offset.

Despite the company’s weak earnings trends, Marberger highlighted progress the company has made toward shaving its leverage ratio and improving free cash flow. Conagra’s net leverage ratio fell to 3.55 times (net debt to adjusted EBITDA) during the second quarter from 3.9 times a year earlier. The change in the free cash flow was even more dramatic — $641 million generated in the second quarter of fiscal 2024 versus $109 million a year earlier.

“Our focus on managing inventory levels and improvement in accounts payable directly contributed to these strong results,” Marberger said. “In addition, we had strong cash distributions from Ardent Mills in the second quarter, reflecting the strong profit and cash flow performance of Ardent Mills the last few years.”