IN PICTURES: How To Make Your First $1 Million
Second-Quarter Results
Reported net sales jumped 52% to $1.3 billion, though acquiring Folgers accounted for all quarterly growth. Backing out the purchase and a small negative adjustment from currency fluctuations, organic growth fell 6% to $790 million, which consisted of 1% volume growth and a 7% drop from pricing in retail oils and baking, as well as an unfavorable product mix. Management cited volume growth in flagship brands including Pillsbury, Crisco and Jif, but weakness in the canned milk, fruit spread and several other product lines.
Reported operating income advanced an impressive 168% to $231 million despite continued Folgers merger and integration costs. Stripping out these and other one-time charges, Smucker detailed that income from continuing operations still improved a respectable 21% to $1.22 per diluted share. Reported earnings were $1.18 per diluted share, which was well ahead of analyst projections.
Outlook
Smucker is now expecting full-year sales of $4.5 billion and earnings per diluted share between $3.95 and $4.05, which excludes 17 to 19 cents in merger charges.
Bottom Line
Adding the more profitable Folgers business to Smucker's overall operations is proving to be a boon to shareholders, while the overall integration looks to be a success. Smucker is in the midst of an advertising campaign to further build awareness of many of its leading brands. Significant organic growth will be hard to come by, but the reported sales and profit expansion is welcome news in a mature consumer goods industry that is seeing firms like Sara Lee (NYSE: SLE) and Unilever (NYSE: UN) shrink in size to boost overall profitability.
Even Colgate-Palmolive (NYSE: CL), which has posted stellar high-single-digit sales growth over the past five years, is rumored to be considering merging with U.K.-based Reckitt Benckiser. Smucker, which before the Folgers purchase counted on the U.S. and Canada for nearly all of its sales, is content for now remaining focused on the domestic market. At a forward P/E of 14, the shares aren't a steal but are not at all unreasonably valued.
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