J.M. Smucker earnings climb 7% in second quarter

by Eric Schroeder
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ORRVILLE, OHIO — Earnings at the J.M. Smucker Co. rose 7% in the second quarter despite relatively flat sales. Net income in the quarter ended Oct. 31 was $149,726,000, equal to $1.25 per share on the common stock, up from $139,990,000, or $1.18 per share, in the same period of fiscal 2010.

Sales for the quarter finished narrowly higher, edging up to $1,278,913,000 from $1,278,745,000. Excluding the impact of the company’s divestiture of its potato products business and foreign exchange, net sales were up 1% from the second quarter of fiscal 2010.

Overall volume declined 4% during the quarter, driven by the company’s U.S. retail oils and baking market segment brands and Folgers coffee in the U.S. retail coffee market segment. Smucker said volume gains were sharpest across the special markets segment, while gains also were scored in Dunkin’ Donuts packaged coffee, Smucker’s fruit spreads, and Jif peanut butter.

“We are pleased to deliver another quarter of strong earnings in this challenging economic environment,” said Tim Smucker, chairman of the board and co-chief executive officer. “Our team continues to take a long-term view of our business, focusing on the health of our brands, delivering value to our consumers, and managing the balance between volume growth, share of market gains, and profitability.”

Operating profit within J.M. Smucker’s U.S. retail coffee business rose 13% to $149,099,000, up from $131,850,000 in the same period a year ago. Sales, meanwhile, increased 7% to $477,287,000.

“Price increases totaling 13% were taken in 2011 to cover rising green coffee costs, but were partially offset by a 7% overall volume decline and additional promotional spending,” Smucker said. ”Volume decreased in the Folgers brand while Dunkin’ Donuts packaged coffee continued its double-digit growth. The introduction of Folgers Gourmet Selections and Millstone K-Cups offerings during the quarter contributed approximately 2% to U.S. retail coffee market segment net sales.”

The U.S. retail consumer unit posted operating profit of $74,287,000, up 5% from $70,512,000 in the same period a year ago. The company attributed the gain to lower supply chain and raw material costs, primarily peanuts and corn sweetener. Net sales for the quarter fell 6% to $272,564,000 from $290,090,000. Net sales included the impact of a peanut butter price reduction of 5% taken earlier in the fiscal year.

“Volume gains were realized in Smucker’s fruit spreads, Jif peanut butter, and Smucker’s Snack’n Waffles brand waffles, offsetting volume declines in Smucker’s Uncrustables sandwiches and toppings,” the company said.
Operating profit in the U.S. retail oils and baking market segment fell 10% to $40,854,000, down from $45,398,000. Sales also finished lower, easing 8% to $279,523,000 from $303,896,000.

“Pillsbury flour and baking mixes volume was down double digits due to a combination of planned reductions in lower-margin products, and an unprecedented competitive and promotional environment,” the company said. “Following a price decline taken earlier in the year, Crisco oils volume showed modest improvement, but was down 3% from the second quarter of 2011, compared to 2010.”

Special markets operating profit rose 24% to $49,406,000 from $40,003,000. Sales edged only narrowly higher, rising to $249,539,000 from $239,657,000.

Overall, for the six months ended Oct. 31 net income totaled $252,607,000, or $2.12 per share, up 6% from $238,053,000, or $2 per share, in the same period of fiscal 2010. Net sales for the six months were $2,326,225,000, down narrowly from $2,330,271,000.

The company updated its outlook for the year. Income per diluted share, excluding special project costs of 70c to 75c per diluted share, is expected to increase to a range of $4.55 to $4.65. Previously, excluding merger and integration costs of 55c to 60c per diluted share, income was expected to range between $4.50 and $4.60.

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