Investors had been waiting to see how Smucker would use cash

Investors had been waiting to see how Smucker would use cash

US food group JM Smucker could still be on the look-out for acquisitions even after its investment in revamping its supply chain and manufacturing in North America, according to a leading analyst.

Smucker yesterday (24 March) outlined plans to close four plants across the US and Canada, build a new facility in Ohio and consolidate its coffee processing in New Orleans.

The jams, jellies and peanut butter maker, which also owns Folgers coffee, plans to spend around US$220m on the restructuring.

Sanford Bernstein analyst Alexia Howard said the move would answer questions over Smucker was planning to use its cash reserves since its Folgers acquisition but said acquisitions are still possible.

"Questions have arisen about what the company plans to do with the cash, and the restructuring announced provides some clarity about that," Howard wrote. "We would still expect the company to continue looking for acquisitions, as per its stated strategy of growing, at least in part, by acquisition."

Smucker expects to incur $190m in charges but insisted the moves would save the business $60m a year.

Howard estimated that further investment in the business would mean that not all of the savings would drip down to the bottom line.

"The company ... noted that the full $60m of cost savings may not all fall to the bottom line as some savings may be reinvested in the business. As such, we model the company reaching $45m of cost savings that hit the bottom line by 2015," Howard said.

Officials at Smucker could not be reached for further comment.