US: The Hershey Company profits fall, lowers estimates
The Hershey Company has reported a fall in earnings for its third quarter and lowered its full year estimates.
The US chocolate maker said that consolidated net sales were US$1,399,469,000 compared with $1,416,202,000 for the third quarter of 2006. Net income for the third quarter of 2007 was $62,784,000 or $0.27 per share-diluted, compared with $185,121,000, or $0.78 per share-diluted, for the comparable period of 2006.
"Throughout 2007, our top priority has been to restore momentum within the US," said Richard H. Lenny, chairman and CEO. "Against a backdrop of severe commodity cost pressures and strong competitive activity, we're maintaining this focus. In the third quarter we experienced improvements in key aspects of our portfolio.
"Reported net sales for the quarter were down 1%, primarily driven by the timing of seasonal shipments and a significant reduction in inventory levels at distributors. This reduction is the result of slower-than- anticipated improvement in the convenience store class of trade and tighter credit conditions for these distributors. Importantly, Hershey's international business continued to gain traction behind our joint ventures in emerging markets. Third quarter profitability was curtailed by lower sales, including increased trade promotion, and the impact of higher dairy costs."
For the first nine months of 2007, consolidated net sales were $3,604,494,000, compared with $3,607,621,000 for the first nine months of 2006. Reported net income for the first nine months of 2007 was $159,811,000 or $0.69 per share-diluted, compared with $405,489,000, or $1.69 per share- diluted, for the first nine months of 2006.
Lenny said: "During the fourth quarter, our investment in consumer and customer programming will be up markedly when compared to both the just-completed third quarter and the fourth quarter of 2006. The focus will be on Hershey's iconic brands, new products, such as Cacao Reserve and Reese's Whipps, customer- specific events and expanded retail coverage.
"We do expect a sequential improvement in marketplace performance in the fourth quarter. However, continued competitive activity as well as a tightening of inventory levels at select distributors will dampen sales performance in the fourth quarter. Therefore, organic net sales for 2007 are expected to decrease about 1%. Profitability will be impacted by higher dairy costs and increased business investment. As a result, we anticipate full-year diluted earnings per share from operations to be in the $2.08 to $2.12 range," Lenny concluded.
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