ORRVILLE, OHIO — Contributions from the Sara Lee food service business, coupled with continued growth from K-Cups and momentum in the spreads business drove a 32% gain in earnings at the J.M. Smucker Co. in the third quarter. The solid financials led Smucker to raise its full-year non-GAAP net income per share forecast to $5.17 to $5.22 from $5.12 to $5.22. Sales in the full year are expected to increase more than 6% over fiscal 2012.
Net income in the quarter ended Jan. 31 totaled $154,168,000, equal to $1.42 per share on the common stock, up from $116,844,000, or $1.03 per share, in the same period a year ago. Sales for the quarter also improved, climbing 6% to $1,559,558,000 from $1,467,641,000. Smucker said the addition of the Sara Lee food service coffee and hot beverage business contributed $59.7 million to net sales in the third quarter.
The company’s K-Cup and peanut butter products, which are priced higher per pound than other products in the company’s portfolio, drove favorable sales mix in the quarter, Smucker said. Volume gains were realized in Jif peanut butter and Smucker’s fruit spreads, but partially were offset by decreases in the Pillsbury brand and the Canadian Robin Hood and Five Roses flour brands. Overall volume decreased 1% in the third quarter.
“Our strategy of generating growth through brand-building, innovation, acquisitions and productivity initiatives made possible solid third-quarter and year-to-date results,” said Richard Smucker, chief executive officer. “Our brands continue to demonstrate their strength and resilience.”
Operating profit within J.M. Smucker’s U.S. retail coffee business increased 27% in the third quarter to $175.2 million from $138.3 million. Sales fell 2% to $627.7 million.
“Green coffee costs were significantly lower in the third quarter of 2013, compared to the third quarter of 2012,” Smucker said. “The company reduced coffee prices in May 2012 with the expectation that it would recognize lower green coffee costs as it progressed through its fiscal year. The majority of these lower costs was recognized during the quarter and, in large part, offset the unfavorable impact realized earlier in the year. On a year-to-date basis, the net impact of lower prices and green coffee costs has been relatively neutral to segment profit. Mix also contributed to the increase in segment profit in the third quarter of 2013, compared to 2012, offset somewhat by an increase in marketing expenses.”
The U.S. retail consumer foods unit posted operating profit of $106.2 million, virtually unchanged from $106.6 million in the same period a year ago. The company said profit was positively impacted by mix along with decreases in marketing and selling expenses. Smucker said it reduced peanut butter prices by about 10% late in the third quarter in anticipation of lower peanut costs in future periods.
Net sales in the segment for the quarter rose 4% to $581.3 million from $556.5 million.
“Jif brand net sales increased 21% in the third quarter of 2013, compared to 2012, reflecting a 17% volume increase,” Smucker said. “Jif peanut butter volume in last year’s third quarter was significantly lower, impacted by the 30% price increase at the beginning of that quarter along with the consumer buy-in that occurred in advance of it. Smucker’s fruit spreads net sales and volume increased 5% and 9%, respectively, in the third quarter of 2013, compared to 2012. Net sales and volume of Smucker’s Uncrustables frozen sandwiches both increased 38% during the same period, benefiting from new distribution. Net sales for the Pillsbury brand decreased 4%, while volume decreased 9%, in the third quarter of 2013, compared to 2012, with approximately one-half of the volume decline due to the tonnage impact of the previously announced cake mix downsizing. Canned milk net sales and volume decreased 10% and 5%, respectively, during the third quarter of 2013, compared to 2012.”
Operating profit in the International, Foodservice, and Natural Foods segment increased 28% to $49.9 million from $39 million. The Sara Lee food service business contributed more than one-half of the segment profit increase in the third quarter. Sales also finished higher, increasing 28% to $350.6 million from $273.2 million.Overall, for the nine months ended Jan. 31 net income totaled $413,878,000, or $3.78 per share, up 16% from $355,614,000, or $3.12 per share, in the same period of fiscal 2011. Net sales for the nine months were $4,558,007,000, up 9% from $4,170,429,000.