J.M. Smucker (NYSE:SJM) reported on Thursday a 15% drop in second-quarter profit despite higher sales, as inflation continued to push costs up faster than the company could raise prices.
The Orrville, Ohio-based maker of Jif peanut butter, Hungry Jack and Crisco, posted net income of $127.2 million, or $1.12 a share, compared with $149.7 million, or $1.25 a share, in the same quarter last year.
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The results, which include an estimated $11.3 million loss from the company’s divestiture of the Europe’s Best frozen fruit and vegetable business, missed average analyst estimates polled by Thomson Reuters of $1.39 a share.
However, revenue for the three-month period was $1.5 billion, up 18% from $1.28 billion a year ago, virtually matching the Street’s view of $1.49 billion. Sales climbed on higher prices across most of the company’s brands and the addition of Rowland Coffee brands, which it acquired earlier this year. Volumes improved in its Pillsbury baking business and for Jif peanut butter.
The company’s chief executive, Richard Smucker, attributed the record sales growth to “robust contributions from product innovations,” such as its new Dunkin Donuts K-Cups and seasonal offerings.
Still, the U.S. retail coffee’s profit plunged 6% to $140 million as the company faced climbing green coffee costs and softer volumes of Folgers. The food maker also faced a 30% rise in cost of goods sold due to rising inflation.
J.M. Smucker notes that while green coffee expenses have moderated, the company predicts they will increase considerably through the remainder this its fiscal year.
Looking forward, the food manufacturer says it expects net price realization to help its 2012 sales increase. The company now expects income to be in the range of $4.90 to $5 a share for the full year. Wall Street is looking for a higher profit of $5.12 a share.
J.M. Smucker notes that outlook does not include its expected purchase of a majority of Sara Lee’s (NYSE:SLE) North American foodservice coffee and hot beverage business. That deal is slated to close early next year, but the company says it does not forecast it to have a material impact on earnings this year.