J. M. Smucker Co. Reports 9 Percent Net Sales Gain In Third Quarter

The U.S. retail coffee market segment net sales increased 18 percent in the third quarter of 2011, compared to the third quarter of 2010. Through the third quarter, price increases totaling 13 percent were taken during 2011 to cover rising green coffee costs. The impact of these price increases, and favorable sales mix more than offset a 2 percent volume decline. The introduction of Folgers Gourmet Selections(R) and Millstone(R)K-Cups(R) offerings earlier in the fiscal year added approximately 4 percent to U.S. Retail Coffee Market segment net sales in the third quarter of 2011. Volume decreased 3 percent for the Folgers(R) brand while Dunkin' Donuts(R) packaged coffee increased 8 percent in the third quarter of 2011, compared to 2010.

U.S. retail coffee market segment profit increased 19 percent in the third quarter of 2011, compared to the third quarter of 2010. Green coffee costs were significantly higher in the third quarter of 2011, compared to the third quarter of 2010, but were offset by previously announced price increases and favorable sales mix. Promotional spending was up for the third quarter of 2011 compared to 2010, but at an overall lower rate during the Fall Bake and Holiday period while marketing expenses decreased. As a result, segment profit margin was 28.5 percent in 2011, compared to 28.1 percent in 2010. The company expects to recognize higher green coffee costs in the fourth quarter and, as a result, announced a 10 percent price increase in early February.

The U.S. retail consumer market segment net sales increased 5 percent while volume increased 7 percent, excluding the effect of potato products divested in the fourth quarter of 2010. Net sales include the impact of a peanut butter price reduction of 5 percent taken earlier in the fiscal year. Volume gains were realized in Jif(R) peanut butter, Smucker's(R) fruit spreads, and Hungry Jack(R) pancake mixes and syrup. Reported segment net sales were flat and volume increased 3 percent, respectively, for the third quarter of 2011, compared to the third quarter of 2010, reflecting the divested potato products.

The U.S. retail consumer market segment profit increased 9 percent for the third quarter of 2011, compared to the third quarter in 2010, due to a decrease in supply chain and certain raw material costs, primarily peanuts. These more than offset a 5 percent increase in segment marketing expense during the third quarter of 2011. Segment profit margin for the quarter improved significantly from 24.2 percent in the third quarter of 2010, to 26.4 percent in 2011.

Net sales and volume in the U.S. retail oils and baking market segment increased 4 percent and 3 percent, respectively, for the third quarter of 2011, compared to 2010. Net sales for the Crisco(R) brand increased 14 percent, on volume gains of 27 percent in the third quarter of 2011, compared to 2010, reflecting the impact of the price decline taken earlier in the fiscal year. While net sales were flat, Pillsbury(R) baking volume declined 9 percent resulting from a combination of planned reductions in lower-margin products, and a continuing competitive and promotional environment. Volume also declined in branded canned milk in the third quarter of 2011, compared to 2010.

The U.S. retail oils and baking market segment profit decreased 12 percent for the third quarter of 2011, compared to the third quarter of 2010, reflecting the pricing actions taken in response to competitive dynamics. Also, higher costs were realized for milk, sugar, and soybean oil. Segment profit margin decreased from 14.7 percent in the third quarter of 2010, to 12.4 percent in 2011.

Net sales in the special markets segment increased 7 percent in the third quarter of 2011, compared to 2010. Excluding foreign exchange, net sales increased 4 percent over the same time period. Volume increased 7 percent in the third quarter of 2011, compared to 2010, driven by gains in the natural foods, pickles, baking, and coffee categories.

Special markets segment profit decreased 8 percent and profit margin declined to 12.3 percent from 14.2 percent for the third quarter of 2011, compared to 2010. Impairment charges of $17.2 million related to Europe's Best(R) intangible assets in Canada were recorded in the third quarter of 2011, compared to $7.3 million in the third quarter of 2010. The incremental charge of $9.9 million reduced segment profit margin by 4.2 percentage points.