Smucker confirms Q2 sales, earnings slide

Smucker confirms Q2 sales, earnings slide

JM Smucker, the US condiments-to-coffee group, booked a drop in first half sales and earnings on the back of weaker volumes at its US retail coffee business.

The company said sales in the six months to 31 October fell 4% to US$2.8bn. The decline was more pronounced in the second quarter, when sales slid 5% due to decreased volumes "most significantly" in retail coffee.

First-half operating income slipped 1% to $472.3m. The group's operating margin strengthened, however, rising to 16.8% of sales from 16.4% of sales in the year-ago period. Net income was down 2% to $274.3m.

Last week, Smucker slashed its full-year sales and profit forecasts on the back of weakness in its coffee division. For the full year, sales are expected to decrease to 1% compared to a previous forecast of growth of 3-4%. Earnings guidance was lowered to $5.45-5.65 per share compared with an earlier expectation of $5.95-6.05.

CEO Richard Smucker said today (19 November) that while coffee fell short of expectations, the company's consumer food brands put in a solid showing. "The balance of our businesses performed well led by the Jif, Crisco and Smucker's brands.  As we move to the second half of the fiscal year, we have adjusted our tactics to address short-term challenges.  We continue to have healthy, consumer-relevant brands, a strong innovation pipeline, and a very talented team. We are optimistic about our prospects for future, long-term growth," he commented.

Show the press release

The J. M. Smucker Company Announces Fiscal 2015 Second Quarter Results

-- EPS up 6 percent; Non-GAAP EPS flat
-- Quarter results significantly impacted by volume declines in Coffee segment
-- Consumer Foods segment profit up 17 percent

ORRVILLE, Ohio, Nov. 19, 2014 /PRNewswire/ -- The J. M. Smucker Company (NYSE: SJM) today announced results for the second quarter ended October 31, 2014, of its 2015 fiscal year.  Results for the quarter and six months ended October 31, 2014 and 2013, include the operations of Sahale Snacks, Inc.("Sahale") since the completion of the acquisition on September 2, 2014, Enray Inc. ("Enray") since the completion of the acquisition on August 20, 2013, and the impact of the Company's licensing and distribution agreement with Cumberland Packing Corp. ("Cumberland"), which commenced on July 1, 2013.

Executive Summary



Three Months Ended October 31,

Six Months Ended October 31,



2014


2013


% Increase
(Decrease)

2014


2013


% Increase
(Decrease)



(Dollars in millions, except per share data)













Net sales

$     1,481.8


$     1,559.9


(5%)

$ 2,805.6


$ 2,910.8


(4%)

Operating income

$        254.8


$        250.8


2%

$     446.4


$     464.1


(4%)


% of net sales

17.2%


16.1%



15.9%


15.9%



Net income:












Net income

$        158.3


$        153.4


3%

$     274.3


$     280.0


(2%)


Net income per common share - assuming dilution

$           1.55


$           1.46


6%

$       2.69


$       2.65


2%












Operating income excluding certain items affecting comparability

$        250.3


$        261.5


(4%)

$     472.3


$     477.5


(1%)


% of net sales

16.9%


16.8%



16.8%


16.4%



Income excluding certain items affecting comparability:












Income

$        155.4


$        160.5


(3%)

$     291.5


$     288.9


1%


Income per common share - assuming dilution

$           1.53


$           1.53


0%

$       2.86


$       2.74


4%

 

  • Second quarter net sales decreased 5 percent in 2015, compared to 2014, reflecting decreased volume, most significantly in the U.S. Retail Coffee segment.
  • Operating income excluding the impact of restructuring and merger and integration costs and unallocated derivative gains and losses ("certain items affecting comparability") decreased 4 percent in the second quarter of 2015, compared to 2014, and was attributed to the impact of a decline in gross profit, driven by the U.S. Retail Coffee segment, offset by lower marketing expenses.
  • Income excluding certain items affecting comparability decreased 3 percent in the second quarter of 2015, compared to 2014, due to the decrease in operating income partially offset by a decrease in interest expense.
  • Second quarter income per diluted share, excluding certain items affecting comparability, was flat in 2015, compared to 2014, and benefited from the Company's share repurchase activities during the second half of fiscal 2014 which reduced weighted average shares outstanding by 3 percent.
  • Net income per diluted share increased 6 percent in the second quarter of 2015, compared to 2014, reflecting a favorable change in unallocated derivative gains and losses.

"Our second quarter fell short of expectations primarily driven by our coffee business," said Richard Smucker, Chief Executive Officer.  "We are confident that this shortfall was a result of short-term challenges and that the fundamentals of our coffee business remain solid.  Our rapid ascent of coffee prices to reflect higher green coffee costs impacted volume more than we expected.  The balance of our businesses performed well led by the Jif®, Crisco®, and Smucker's®brands.  As we move to the second half of the fiscal year, we have adjusted our tactics to address short-term challenges.  We continue to have healthy, consumer-relevant brands, a strong innovation pipeline, and a very talented team.  We are optimistic about our prospects for future, long-term growth."

"Since acquiring the coffee business in 2008, we have successfully navigated through many business climates including ever-changing consumer habits and fluctuating green coffee markets, yet we have been able to consistently grow earnings in the coffee segment and our brands continue to lead in market share by a wide margin," added Vince Byrd, President and Chief Operating Officer.  "Clearly our most recent pricing actions affected our volume more than we anticipated.  The pricing impact of higher green coffee costs will continue through the remainder of the fiscal year; however, we expect our coffee volume trends to improve versus our second quarter as we tactically address this short-term challenge."

Original source: JM Smucker