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The J.M. Smucker Company Reports Operating Results (10-Q)

March 09, 2012 | About:

10qk

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The J.M. Smucker Company (SJM) filed Quarterly Report for the period ended 2012-01-31.

Smucker Jm has a market cap of $8.66 billion; its shares were traded at around $75.44 with a P/E ratio of 16.5 and P/S ratio of 1.8. The dividend yield of Smucker Jm stocks is 2.5%. Smucker Jm had an annual average earning growth of 10% over the past 10 years. GuruFocus rated Smucker Jm the business predictability rank of 2.5-star.

Highlight of Business Operations:

Net sales in the third quarter of 2012 increased $155.3 million, or 12 percent, compared to the third quarter of 2011, reflecting a 16 percentage point impact of net price realization and a five percentage point impact from acquisitions, that were offset to a degree by a greater-than-anticipated decline in overall volume of 10 percent. The decline in volume was primarily driven by Crisco® shortening and oils, Folgers® coffee, and Jif® peanut butter. The addition of the Rowland Coffee business earlier in the fiscal year and the Sara Lee foodservice business during the most recent quarter contributed $33.0 million and $26.9 million to net sales in the third quarter of 2012, respectively. The overall impact of sales mix was modestly favorable, primarily due to K-Cups®.

Operating income decreased $25.5 million, or four percent, in the first nine months of 2012, compared to 2011. Operating margin for the first nine months of 2012 was 14.2 percent, compared to 17.0 percent in 2011. Excluding the impact of special project costs in both periods, operating income decreased $19.4 million, or three percent, and declined from 19.2 percent of net sales in 2011, to 16.3 percent in 2012. Both operating income measures include the Europes Best® impairment charge in 2011 and an $11.3 million loss on the sale of the Europes Best® business in 2012.

The U.S. Retail Coffee segment net sales increased 15 percent in the third quarter of 2012, compared to the third quarter of 2011, reflecting the net realization of price increases taken over the last 12 months. The acquisition of Rowland Coffee contributed approximately $28.5 million to segment net sales, representing five percentage points of the segment net sales increase. Segment volume decreased 11 percent for the third quarter of 2012, compared to the third quarter of 2011, excluding Rowland Coffee. Volume declined for the Folgers® brand in line with the overall segment in the third quarter of 2012, compared to 2011, and was primarily attributed to consumer response to higher price points on shelf and aggressive private label price points at certain key retailers. Dunkin Donuts® packaged coffee volume was up four percent. Contributing to favorable sales mix in the third quarter of 2012, net sales of Folgers Gourmet Selections® and Millstone® K-Cups® increased $38.2 million, compared to the third quarter of 2011, and represented seven percentage points of segment net sales growth, while contributing only one percentage point growth to volume.

Segment profit increased $9.1 million in the third quarter of 2012, compared to 2011 that included an impairment charge of $17.2 million related to intangible assets of the Europes Best® business. Excluding the impact of the impairment charge in the third quarter of 2011, segment profit decreased $8.0 million, primarily due to lower sales volume. In the third quarter of 2012, compared to 2011, commodity costs were higher and not fully offset by price increases, notably in coffee and natural beverages. Segment profit margin was 14.3 percent in the third quarter of 2012, compared to 12.5 percent in the third quarter of 2011 which included a 7.2 percentage point impact of the Europes Best® business impairment charge. As expected, the Sara Lee foodservice business did not have a material impact on segment profit in the third quarter of 2012.

Cash provided by operating activities in the first nine months of 2012 was $469.2 million, compared to $394.4 million in 2011, as cash generated from earnings offset working capital requirements in both periods. The increase in cash provided by operations in the first nine months of 2012, compared to 2011, was driven by a decrease in working capital requirements due to the timing of income tax payments and the collection of trade receivables balances. This more than offset a decrease in accounts payable and accrued items balances, which were largely due to the timing of marketing and merchandising related payments. As the Easter holiday occurred later in 2011, more of the collection cycle occurred in the first nine months of 2012, compared to the first nine months of 2011. Cash provided by operating activities in the first nine months of 2012 included the net proceeds from the settlement of interest rate swaps of $17.7 million.

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