Nut producer John B. Sanfllippo & Son saw net income slump during its first quarter, despite recording net sales rising.

For the three months to 23 September, net income tumbled 77.4% to US$1.1m as Sanfilippo spent more on advertising and costs linked to May’s acquisition of Orchard Valley Harvest.

Nevertheless, Sanfilippo announced that sales grew 15.8% in the quarter due to higher selling prices and increased sales volume. Increased commodity costs meant that sales prices increased on all major product types except peanuts. Sales volumes increased 4.8%.

The company said that net sales and sales volume increased in the consumer distribution channel, which accounted for approximately 50% of the increase in total net sales and sales volume and was mainly attributable to the acquisition of Orchard Valley Harvest.

However, gross profit margins fell from 18.8% to 14% in the first quarter of fiscal 2011. Gross profit margins declined significantly on sales of shelled walnuts and pecans because of the need to purchase high cost shelled walnuts and pecans in the spot market during the quarter.