The J.M. Smucker Co. (SJM, Financial) reported its first-quarter 2019 financial results on Aug. 21, surpassing earnings estimates.
Snapshot of the quarter
The company’s net income for the quarter came in at $133 million, or $1.17 per share, up from $126 million, or $1.12 per share, in the year-ago quarter. Adjusted earnings per share grew 18% to $1.78. Quarterly sales rose 9% to $1.9 billion.
The company's acquisition of Ainsworth Pet Nutrition, which closed in May, proved to be profitable as it contributed $162.8 million to the company’s total quarterly sales.
Smucker’s Uncrustables, Dunkin' Donuts, Café Bustelo, Nature's Recipe and Sahale Snacks brands all witnessed double-digit sales growth. Declines in some of its established brands, such as Folgers, Jif and Natural Balance, did not offset gains in other segments.
The company’s adjusted gross margin jumped roughly 8% to $700.2 million. Its operating income rose 5% year over year to $317.1 million. It had an operating margin of 16.7%.
At the end of the first quarter, the company had $192 million in cash and cash equivalnets. Long-term debt stood at $6.2 billion. Further, the company generated $243 million in operating cash flow. Free cash flow was $141.7 million.
Segment details
The company is currently focusing on expanding its profitable businesses and, at the same time, divesting unprofitable segments.
In its U.S. retail coffee segment, the company saw sales growth of 2% year over year to $489.5 million thanks to robust performances of the Dunkin' Donuts and Cafe Bustelo brands, which was only partially offset by declines from Folgers and ground coffee. The segment’s bottom line climbed 12% to $147.8 million due to lower input costs. The company plans to expand its presence in the Premium and One-Cup coffee segments as well as the Folgers brand.
Sales in the retail consumer food segment fell 1% to $483.3 million. Earnings plummeted 12% as a result of higher freight and input costs and higher marketing spend.
The pet food segment posted an impressive 29% sales growth to $671.2 million. Excluding the impact of Ainsworth, the company’s sales in this segment declined 2%. The segment's profit rose 3% year over year to $100.4 million. Furthermore, the company plans to introduce new pet snacks products in the second half of the year that are projected to generate more than $100 million in annual incremental sales.
Sales in the international arena fell 1% to $258.5 million due to lower net price realizations. On the flip side, profit improved 8% to $49.6 million.
Guidance
Smucker says Ainsworth is expected to help it achieve top-line growth. The company expects full-year sales of $8 billion, which is below its previous guidance of $8.3 billion. The company’s adjusted earnings per share are projected to be between $8.40 and $8.65. Free cash flows is anticipated to range from $800 million to $850 million.Â
Disclosure: I do not hold any positions in the stocks mentioned in this article.
