JM Smucker Reaffirms Guidance

J.M. Smucker Co. (SJM - Analyst Report) recently reported a 12% rise in first-quarter earnings to 92 cents beating the Zacks Consensus Estimate of 81 cents. Quarterly net sales grew 58.4% year over year, primarily due to the addition of Folgers coffee business.

Excluding the Folgers business, volumes increased 2%, driven by Pillsbury flour, baking mixes, and frostings, Crisco oils, Jif peanut butter, and Smucker's fruit spreads. These were partially offset by declines in the special markets segment. Organic net sales were down 1% during the quarter.

Then company’s US retail coffee market segment posted quarterly sales of $366.2 million on a 9% rise in volumes. The continued expansion of Dunkin' Donuts in the gourmet category and strong growth in traditional roasted and ground coffee boosted performance.

Net sales of the US retail consumer market segment grew 6% from last year, primarily driven by a 7% volume gain from Jif peanut butter, Smucker's fruit spreads and Hungry Jack pancakes and syrups. Favorable product mix and supply chain efficiencies contributed to the top line. However, sales of Smucker's Uncrustables were down for the quarter.

Sales in the US retail oils and baking market segment fell 2% year over year, reflecting the impact of higher promotional spending and price declines in shortening, oils, flour and canned milk. However, volumes grew 8% due to double-digit gains in Crisco oils and Pillsbury flour, baking mixes and frostings, which were partially offset by declines in canned milk.

Net sales in the special markets segment grew 4%, primarily on the Folgers acquisition. However, volumes were down 9% due to declines in foodservice and natural foods. Gross margin for the quarter expanded 730 basis points (bps) to 38.6% versus 31.3% in the year-ago quarter. The acquisition of Folgers contributed almost 90% of this increase.

Interest expense for the quarter increased by 2.5% or $8.2 million during the quarter due to an increase in the debt level related to the Folgers transaction. However, the company had repaid approximately $75 million of debt as of June 1. Cash and cash equivalents at the end of the quarter were $28.9 million compared to $13.5 million last year.

J.M. Smucker also reaffirmed its outlook for fiscal 2010. It sees net sales of about $4.5 billion and annual earnings in the range of $3.65 to $3.80. Based on the company’s strong first-quarter performance, earnings are anticipated at the high end of the range.

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