J.M. Smucker income climbs 29%

by Eric Schroeder
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ORRVILLE, OHIO — Higher sales, gross margin improvements and a reduction in restructuring and merger and integration costs all combined to help drive a 29% gain in net income at the J.M. Smucker Co. during the third quarter. In the third quarter ended Jan. 31, net income totaled $40,427,000, equal to 72c per share on the common stock, up from $31,312,000, or 54c per share, in the same year-ago quarter.

Net income for the third quarter of fiscal 2007 included pre-tax restructuring charges of $500,000. Year ago results included $7.8 million in pre-tax merger and integration costs and $5.4 million in restructuring charges.

Net sales were $523,081,000, down 2% from $536,453,000 in the third quarter of fiscal 2006. But excluding sales of divested businesses, sales during the quarter rose 6%, Smucker said.

"We achieved good results for the quarter with sales growth and share of market gains across most of our brands," said Richard Smucker, president and co-chief executive officer. "Earnings grew at an even stronger rate, despite escalating raw material costs, as we are realizing the benefits of previous actions we have taken to offset cost increases and improve our overall profitability. We expect the cost environment to remain difficult and we will continue to take actions to mitigate the cost increases."

Sales in the retail market, including the Jif, Crisco, Pillsbury, Hungry Jack and Martha White brands, were $393.8 million, up 5% from $375.8 million in the third quarter of 2006.

Sales in the consumer strategic area increased 4% for the quarter, led by gains in peanut butter, fruit spreads, toppings and Uncrustables.

In the consumer oils and baking area, sales climbed 5% in the third quarter of 2007 compared with 2006. Smucker said sales gains in retail oils, frostings, baking ingredients and the contribution of the White Lily brand acquired in October 2006 offset declines in sales of industrial oils and baking mixes.

Sales in the special markets, excluding divested businesses, were $129.2 million, up 11% from $116 million last year. Smucker said all areas of the business improved, led by the international business and food service, which each rose 15%. Meanwhile, Canada gained 10% and beverage rose 8%.

"Increased sales of traditional portion control products, as well as increases in Uncrustables in the schools market contributed to the food service improvement," Smucker said. "The increase in Canada was driven by the acquisition of the Five Roses flour brand earlier in the year, the impact of favorable exchange rates, and growth in pickles and relishes."

Looking ahead, Smucker said it remains committed to its long-term sales growth of 8%, with one-half of that total expected to come from its core business and new products, and the remainder coming from acquisitions.

Full-year 2007 sales are expected to increase by 4% over last year, Smucker said, excluding approximately $100 million in sales related to the divestiture of the Canadian non-branded, grain-based food service and industrial businesses.

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