Operating segment income for the third quarter was below last year, adversely affected by SG&A increases due to stranded costs, costs for the stand-alone company and one-off innovation costs. Positive raw material developments are not reflected in this quarter due to the forward buying strategy of the business.
Income was impacted by a $17 million currency mark-to-market loss in this quarter. Adjusted operating margins excluding this impact are healthy at 14.7 percent, a significant increase over the comparable number last quarter of 13.6 percent. As of the spin-off, these currency mark-to-market impacts will be reported below the operating profit line to better track operating results.
MAP spend was below last year, as funds were partly reallocated to support volume actions in selected smaller markets and to foster upcoming innovations.
Innovations are starting to show the first green shoots, with the encouraging launch of the premium R&G line in the Netherlands, the upcoming re-launch of capsules and the re-launch of the Spanish tea range with new flavors and packaging in Q4.
The total Meat Co. business continues to show positive progress. For the first time in the fiscal year, pricing net of commodities was positive in both the retail and foodservice and specialty meats segments. Total volumes have begun to stabilize and were slightly down (less than 1 percent) for the quarter, showing sequential improvement from a 5.7 percent decline over the prior year in Q1 and a 3.5 percent decline over the prior year in Q2, assisted by the timing of the Easter holiday as well as higher commodity turkey sales. Bakery categories in both segments continue to perform below expectations, diluting the stronger performance of the meat categories.
Third quarter reported and adjusted net sales showed a slight increase of almost 1 percent over the prior year third quarter as positive pricing offset a weaker sales mix. Unit volumes were flat for the quarter, continuing a sequential improvement from volume declines of 7.3 percent over the prior year in Q1 and a 4.9 percent decline over the prior year in Q2. Volume declines from the transition to third party brokers have shown improvement. Adjusted and reported operating segment income declined, as a result of discounts to move aged inventory and higher MAP spend.
Jimmy Dean continues its strong performance with positive volume growth for the quarter. New innovations, including quesadillas and bowl variants, launched in Q3 and were supported by increased media and advertising spend.
The Ball Park frozen hamburger patty launch in Q3 extends the brand beyond hot dogs. Rollout of this new product will continue through Q4. Media and Advertising campaigns supporting Ball Park are also planned for Q4.
Efforts to refresh and reposition the Hillshire Farm brand continue. The Hillshire Farm sausage business showed improvement in the quarter behind new products launched earlier in the year, increased MAP spend and selected pricing actions implemented in Q2.
In the first nine months, adjusted and reported net sales were flat as pricing and sales mix virtually offset volume declines and higher slotting expenses. Adjusted operating segment income declined 3 percent and reported operating segment income declined 14 percent as lower volumes and higher commodity costs and slotting expenses were not entirely offset by lower SG&A costs and favorable pricing.
In the third quarter, adjusted and reported net sales increased by almost 3 percent and 7 percent, respectively, over the prior year’s third quarter as pricing more than offset volume declines in the segment. Adjusted and reported operating segment income declined as a result of the lower segment volumes and related manufacturing inefficiencies. Low single digit volume growth in the meat business was offset by high single-digit volume declines in bakery as that business continues to suffer from negative economic and industry trends.
In the first nine months, adjusted and reported net sales increased by approximately 3 percent and 9 percent, respectively, driven primarily by higher pricing and the impact of the Aidells acquisition. Adjusted and reported operating segment declines can be attributed to higher commodity costs and declining volumes offsetting additional higher pricing and lower SG&A costs.