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Mayank Marwah
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Key Takeaways From JM Smucker’s 4th Quarter Earnings

Banking on the acquisition of Ainsworth, the company issued positive full-year guidance in terms of earnings and revenue

June 11, 2018 | About:

The U.S. manufacturer of fruit spreads, ice cream toppings, consumer food and beverage products J.M. Smucker Co. (NYSE:SJM) came out with fourth quarter results last week.

Diving into the numbers

The company’s net sales in the fourth quarter came in at $1.78 million, which represented a meager 0.14% decline from the year-ago quarter. Sales of oils, peanut butter and baking categories slowed down while its coffee segment gained. The company also registered a gain in adjusted earnings per share by 7% to $1.93 per share.

Gross profit soared 7% or $43.7 million thanks to a positive change in derivative gains and losses. The company’s selling, distribution and administrative expenses plunged $6.6 million. This low cost was attributable to the company’s cost saving initiatives that more than offset the recall costs of pet food. Operating income during the quarter increased by $112.2 million.

The company registered net interest expense of $7.1 million, and its effective tax rate was 29.6%.

Segment details

In the U.S. retail coffee sector, the company posted net sales gain of $2.3 million, thanks to high volumes of sales at Dunkin' Donuts and Folgers brands. The segment's quarterly profits climbed $6.1 million led by a decline in the input cost, which was only partly offset by lower pricing and increase in marketing expenses.

The company’s retail consumer food category saw net sales decline of $8.5 million caused by declining sales for the Jif, Crisco and Pillsbury brand. Sales growth for the Smucker’s brand could not compensate for declines in those segments. Profit in the consumer food category spiked $5.4 million, thanks to higher pricing that was only moderately offset by lower volumes.

Shifting gears to the U.S. retail pet food segment, its net sales during the quarter plunged $0.9 million primarily due to product recalls. Segment profit declined $15.9 million due to a net adverse impact higher pricing and costs and lower volumes of sales.

The company’s international segment witnessed success due to net sales gain of $4.6 million powered by positive foreign currency exchange. As a matter of fact, the sector’s quarterly profit jumped $1.2 million caused by lower marketing expense and a net favorable impact of lower pricing and cost.

Guidance

The company has also issued guidance for fiscal 2019. The company sees net sales for the whole year to be $8.3 billion and projects adjusted earnings per share will fall between $8.40 and $8.65. The company attributed its marvelous revenue and earnings per share guidance for the whole year to its acquisition of Ainsworth pet nutrition. The company also estimates its free cash flow will be around $800 million to $850 million. Capital expenditure for the same period is expected to come in around $350 million to $370 million.

Disclosure: I do not hold any position in the stock mentioned in this article.

About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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