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February 1, 2012

US: Hershey 2012 sales, profit growth to exceed targets

Hershey has forecast that its sales and earnings will grow faster in 2012 than its long-term targets.

By Dean Best

Hershey has forecast that its sales and earnings will grow faster in 2012 than its long-term targets.

The US confectionery giant today (1 February) predicted that its adjusted earnings per share would increase by 9-11% this year. Adjusted earnings per share will this year exclude certain pension costs, Hershey said.

Net sales are forecast to grow 5-7%. Hershey expects its sales volumes to be higher this year on the back of more product launches in the US and overseas.

In October, Hershey said its 2012 sales would be within its long-term target range of growth of 3-5%. Adjusted earnings per share, it forecast, would also fall in its growth target of 6-8%.

The revised 2012 forecasts came as Hershey reported a 14.8% rise in earnings for the fourth quarter of 2011.

Hershey’s annual adjusted net income, which excludes the costs from Hershey’s Project Next Century restructuring programme, reached US$648.7m, an increase of 10.6%.

However, Hershey admitted its input costs had risen in the fourth quarter as it purchased raw materials to support its fourth-quarter volumes. Combined with higher LIFO discounts and allowances, it meant Hershey’s fourth-quarter and annual margins fell.

The company’s quarterly net sales were up 5.7% at $1.57bn. Volumes were down year-on-year and price increases drove sales. However, Hershey said its volumes increased 0.4 percentage points compared to the third quarter.

Annual net sales were up 7.2% at $6.08bn.

“In 2011, Hershey continued to make good progress against its business model and strategy of investing in core brands and capabilities in the U.S. and key international markets,” president and CEO John Bilbrey said. “Our success is reflected in our solid net sales growth and market share gains, giving us flexibility to make broad-based investments while delivering on our earnings objectives.”

Bilbrey said brand-building would remain a key focus for Hershey in the US and overseas. In the second half of the year, an R&D centre for its Asian operations will open in Shanghai to help Hershey more quickly develop and test new products overseas.

Hershey, which also reported a 10% increase in its quarterly dividend, were down 0.51% at $60.77 at 11:20 ET.

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