J.M. Smucker Q1 Profit Falls, Cuts Sales Outlook

(RTTNews) - Branded food products maker J.M. Smucker Co. (SJM) Wednesday said first-quarter profit declined from the prior year, amid a slide in sales. Looking ahead, the company lowered its sales forecast, but backed its earnings outlook.

The latest results include the operations of Enray Inc. since the completion of the acquisition on August 20, 2013, and the impact of the licensing and distribution agreement with Cumberland Packing Corp., which commenced on July 1, 2013.

Net income fell to $116 million from last year's $126.6 million. Earnings per share dropped to $1.14 from $1.19.

Excluding certain items, earnings per share totaled $1.34, while it was $1.21 last year. On average, 16 analysts polled by Thomson Reuters expected earnings of $1.37 per share for the quarter. Analysts' estimates typically exclude special items.

Gross profit decreased 3 percent, driven by a $26 million unfavorable change in the impact of unallocated derivative gains and losses.

Overall commodity costs were lower, primarily for peanuts, coffee, and oils. The impact of favorable mix and the additions of Enray and Cumberland contributed to gross profit.

Net sales slid 2 percent to $1.324 billion from $1.351 billion in the prior year, reflecting lower net price realization, particularly related to coffee, and the continued impact of the company's exit of its private label hot beverage business in its International, Foodservice, and Natural Foods segment during 2014. Analysts expected revenues of $1.37 billion.

Sales slipped 2 percent in U.S. Retail Coffee to $502.7 million, reflecting lower net price realization and sales mix. But volume rose 2 percent amid an increase of 2 percent in the Folgers brand.

U.S. Retail Consumer Foods generated $522.8 million in revenue, down 3 percent from last year, owing to lower net price realization primarily for the Crisco brand. Volume was flat with last year.

International, Foodservice, and Natural Foods revenue edged down 1 percent to $298.3 million. Excluding the impacts of Enray, Cumberland, and foreign currency exchange, segment net sales and volume both decreased 7 percent from last year.

Richard Smucker, CEO, said, "We are pleased with the start to our fiscal year as we achieved record non-GAAP earnings per share for the quarter...There is little doubt that the operating environment is challenging. However, our brands are well positioned to perform in this competitive market."

For fiscal 2015, the company expects net sales to increase from 2014, at a rate slightly less than the 5 percent provided at the beginning of the year. This estimate includes approximately $25 million of expected net sales contribution from the pending acquisition of Sahale Snacks, Inc.

Despite the modest decline in sales growth, the company maintained its adjusted income per share range of $5.95 to $6.05, excluding certain items affecting comparability of about $0.15 per share. Analysts look for full year earnings of $6.02 per share.

SJM settled up 0.3 percent on Tuesday at $103.45. The stock is down 2.6 percent in pre-market activity.