JM Smucker today (17 November) booked higher half-year earnings despite lower sales, although the US-based food group also reported declining consumer food sales in its domestic market in the second quarter.
The company, which also sells coffee and pet food alongside products like Jif peanut butter and Uncrustables sandwiches, saw its profitability benefit from lower coffee costs and synergies.
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However, Smucker saw sales across all four divisions – coffee, pet food, consumer food and the combined international foodservice unit – fall.
Smucker posted net income of US$347.3m for the six months to the end of October, up 11% year-on-year. Operating income was up 3% at $597.1m amid declines in the cost of goods sold and in SG&A expenses.
Net sales dropped 7% to $3.73bn in part due to the disposal last year of its US canned milk business. However, Smucker still saw its net sales drop after excluding the impact of the disposal from the numbers.
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Looking at Smucker’s US retail consumer foods business, net sales stood at $1.09bn, down from $1.23bn in the first six months of the 2015/2016 financial year. The US canned milk disposal had an impact but, discussing its results for the second quarter, the company said underlying net sales from its domestic retail consumer foods arm fell 4%. Volume/mix slid 4% “driven” by its Jif and Pillsbury brands.
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By GlobalDataProfits from the division were down over the half and second quarter. Smucker, however, said earnings from the unit rose in the second quarter once the impact of the canned milk disposal was excluded from the numbers.
In a note to clients, Susquehanna International Group analyst Pablo Zuanic said: “Synergies and coffee costs are all contributing to the better than expected profit trends but we think sentiment will be driven by the lacklustre top-line trends. The stock may be up early in the day on the EPS beat, but we remain sidelined on sales trends.”
