INSIGHT: Smucker benefits from margin boost
JM Smucker said today (20 November) that improved margins had bolstered its second-quarter profits, which more than doubled year-on-year.
This morning, the Pillsbury maker booked a leap in second-quarter profits, which rose to US$140m in the quarter ended 31 October, up from $51.5m last year.
Speaking to analysts during a conference call, Smucker management said that margin improvements and synergies following its acquisition of Folgers Coffee had boosted profits.
Gross profit margins for the three months to 31 October increased from 28.9% of sales to 38.5% of sales, the company said.
Commenting on the company's margin improvement, Richard Smucker, executive chairman and co-CEO, said that the company was "in a good spot".
However, he added that the group continued to look for ways to improve marging.
"I think we will come to the market with margin targets. I think we will stand back and continue to look for options to expand margins. We aren't going to sit on our laurels," he commented.
According to managements' estimates, the higher margins were approximately 70% due to commodity pricing, with the remaining 30% attributable to cost savings and efficiency gains.
"We intend to continue to drive profit dollars - so we will look at out options and expand margins," chairman Tim Smucker added.
Although the company was able to improve its margins during the period, it also increased its investment in advertising by 70%, with new television adverts airing for the Pillsbury brand for the first time since Smucker acquired the brand in 2004.
"We've had great synergies in marketing. Those dollars that we are spending have really gone further. We have been able to do a number of new commercials. We think that it is going to benefit, but that is a long term benefit," US retail director Steve Oakland commented.
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