Hershey’s second-quarter profits tumbled by more than a third, the US confectionery giant said today (22 July), thanks to costs linked to production changes in its hometown and an impairment charge on its Indian venture.
The company booked net income of US$46.7m for the quarter to 4 July, down from $71.3m a year earlier.
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Hershey said it had incurred $41.5m in costs from its plans, announced in June, to restructure its production sites in its namesake town.
The company also recorded a non-cash goodwill impairment charge of $44.7m on its Godrej Hershey venture in India.
Despite the charge, Hershey insisted it remained committed to the Indian market.
“While the joint venture has achieved growth, it has been less than initial expectations due to slower realisation of development plans and changes in input costs, as well as the macroeconomic environment which has delayed distribution expansion and the implementation of new price points. The India market in which the Godrej Hershey Ltd. joint venture competes remains a strategic growth market for the company,” Hershey said.
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By GlobalDataExcluding these charges, Hershey’s underlying second-quarter net income reached $117m, against $98m in the second quarter of 2009.
Net sales increased 5.3% to $1.23bn thanks to volume gains at home and abroad.
“Hershey delivered solid results in the second quarter driven by our strategy of increasing advertising, consumer investment and US retail coverage on our core brands,” said president and CEO Dave West.
“Net sales increased by 5.3% driven by volume, including improvements in our international business, an approximate one point benefit from foreign currency exchange rates, as well as some net price realisation.”
Click here for the full earnings release from Hershey; check back for coverage of the confectioner’s conference call with analysts.
