The J. M. Smucker Co. announced results for the first quarter endedJuly 31, 2012, of its 2013 fiscal year. Results for the quarter endedJuly 31, 2012, include the operations of the North American foodservice coffee and hot beverage business acquired fromSara Lee Corp. since the completion of the acquisition on Jan. 3, 2012.
"We are pleased with the solid start to the fiscal year with growth in volume, sales, and cash flow," commented Richard Smucker, chief executive officer in a prepared statement. "While the environment remains challenging, we continue to drive long-term growth through brand-building, product innovation, acquisitions, and productivity initiatives while maintaining a healthy balance between volume, market share, and profitability. Our results demonstrate the strength and resiliency of our iconic brands, our ability to adjust rapidly in the marketplace, and the commitment of our team to our strategy."
"We remain focused on our long-term strategy and have made tactical adjustments to address challenging market conditions," commented Vince Byrd, president and chief operating officer. "We have made significant progress in optimizing price points, closing price gaps, and enhancing merchandising activities at retail. Consumers continue to respond positively to these actions, to the new products flowing from our robust innovation pipeline, and to the brands we have recently acquired. We believe we are well-poised for the important back-to-school and holiday seasons and for another successful year of growth."
Net sales increased 15 percent in the first quarter of 2013, compared to the first quarter of 2012, as the impact of acquisition, volume, price, and mix were all positive. The acquired Sara Lee foodservice business contributed 7 percentage points of the net sales growth. Favorable sales mix and higher net realized prices each contributed to growth. Price increases taken on peanut butter since May 2011 were somewhat offset by net declines in coffee prices over the same period. Overall volume, excluding acquisition, increased 2 percent in the first quarter of 2013, compared to the first quarter of 2012, primarily driven by Jif® peanut butter and Folgers® coffee.
Gross profit increased $38.7 million, or 9 percent, in the first quarter of 2013, compared to 2012. Excluding special project costs, gross profit increased$32.2 million, or 7 percent, driven by the acquired Sara Lee foodservice business and a$15.6 million increase in the benefit of unrealized mark-to-market adjustments on derivative contracts, which increased to a gain of$19.7 million in the first quarter of 2013 from a gain of $4.1 million in the first quarter of 2012.
Although the impact by product category varied, overall commodity costs were higher during the first quarter of 2013, compared to the first quarter of 2012, and were not fully offset by price realization. Gross margin contracted from 37.1 percent in the first quarter of 2012 to 34.6 percent in the first quarter of 2013, excluding special project costs.
Selling, distribution, and administrative expenses increased 7 percent in the first quarter of 2013, compared to the first quarter of 2012, and decreased as a percentage of net sales from 18.2 percent to 17.0 percent. Selling expenses increased 16 percent, generally in line with the increase in net sales and driven in part by the acquired Sara Lee foodservice business. General and administrative and marketing expenses increased 8 percent and 6 percent, respectively, while distribution expenses decreased 2 percent due to the consolidation within the company's retail direct-to-store delivery system.
Higher amortization expense was recognized in the first quarter of 2013, compared to 2012, primarily related to the intangible assets associated with the recent acquisition.
Operating income increased$9.8 million in the first quarter of 2013, compared to 2012. Excluding special project costs in both periods, operating income increased$12.6 million, or 6 percent, and declined from 17.3 percent of net sales in 2012 to 15.9 percent in 2013.