J.M. Smucker Slips To Q4 Loss On Costs, But Adj Results Top View

(RTTNews) - Branded food products maker J.M. Smucker Co. (SJM) reported Thursday a net loss for the fourth quarter compared to a profit last year, despite a sales growth, hurt by one-time financing costs associated with the Big Heart Pet Brands acquisition as well as higher commodity costs.

However, both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also provided earnings and sales guidance for the full-year 2016.

"Our 2015 adjusted earnings per share of $5.38, excluding the Big Heart Pet Brands acquisition and financing impacts, were in line with expectations. While these results were significantly impacted by the challenges in our U.S. Retail Coffee segment, we are optimistic about our current initiatives and confident in the long-term prospects of our coffee business," CEO Richard Smucker said.

The Orrville, Ohio-based maker of Smucker's jams and Folgers coffee reported a net loss of $90.3 million or $0.82 per share for the fourth quarter, compared to net income of $118.5 million or $1.16 per share in the prior-year quarter.

Excluding special items, adjusted net loss for the quarter was $45.3 million or $0.41 per share, compared to income of $125.2 million or $1.22 per share in the year-ago quarter.

Results for the latest quarter include one-time financing costs associated with the Big Heart Pet Brands acquisition.

Adjusted income before Big Heart costs for the latest quarter was $0.98 per share. On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.99 per share for the quarter. Analysts' estimate typically excludes one-time items.

Net sales for the quarter grew 17 percent to $1.45 billion from $1.23 billion in the same quarter last year, but topped ten Wall Street analysts' consensus estimate of $1.36 billion.

Net sales, adjusted for certain non-comparable items, declined 2 percent to $1.21 billion from last year.

U.S. retail coffee net sales edged down 1 percent to $468.6 million, and U.S. retail consumer foods net sales decreased 8 percent to $427.5 million from the year-ago quarter.

Meanwhile, international, foodservice, and natural foods net sales grew 6 percent to $311.9 million from last year. The new U.S. retail pet foods division (Big Heart) generated sales of $239.1 million.

"During the quarter, we completed the largest acquisition in our Company's history, adding some of America's best known pet brands to the Smucker portfolio. As we collaborate with the Big Heart team and integrate the pet food business, we are even more confident in our combined strengths and the opportunities for future growth," Smucker added.

Operating income margin contracted 1060 basis points to 4.9 percent from last year's 15.5 percent as gross profit margin dropped 590 basis points from last year amid higher commodity costs.

Overall commodity costs were higher during the quarter, due primarily to green coffee, partially offset by lower peanut and oil costs. Net price realization was also higher but did not offset the impact of the higher costs.

Looking ahead to fiscal 2016, the company expects adjusted earnings in a range of $5.65 to $5.80 per share, on projected net sales growth of 40 percent to about $8 billion, reflecting a full-year contribution from Big Heart of about $2.4 billion. Meanwhile, net sales is expected to increase only about 3 percent on the remainder of the company's businesses.

Street is currently looking for full-year 2016 earnings of $5.84 on annual revenues of $7.97 billion.

SJM closed Wednesday's regular trading session at $118.19, down $0.54 on a volume of 0.64 million shares. In the past 52-week period, the stock has been trading in a range of $95.60 to $120.65.