The J. M. Smucker Co. announced results for the second quarter ended Oct. 31, 2012, of its 2013 fiscal year. Results for the quarter and six months ended Oct. 31, 2012, include the operations of the North American foodservice coffee and hot beverage business acquired from Sara Lee Corp. since the completion of the acquisition on Jan. 3, 2012.
The acquired Sara Lee foodservice business contributed $90.7 million and $177.5 million to net sales for the three and six months ended October 31, 2012, respectively. The operating income and net income excluding the impact of restructuring, merger and integration, and certain pension settlement costs (special project costs) each increased 8 percent in the second quarter. Included in these amounts for the second quarter last year was a pre-tax loss on divestiture of approximately $11.3 million. The second quarter net income excluding special project costs per diluted share increased 12 percent, which includes the benefit from the company's share repurchase activities over the past year.
"We delivered another strong quarter of solid sales and earnings growth," commented Richard Smucker, chief executive officer, in a prepared statment. "Our long-term strategy continues to serve us well in consistently delivering results. Our iconic brands are trusted and have demonstrated their strength and resilience. We have a team of highly talented employees that are fully committed to our culture and to implementing our strategy. All of which point to our company being well-positioned for continued profitable growth."
"Overall consumer spending appears to be on the upswing which is welcome news for the industry," added Vince Byrd, president and chief operating officer. "The tactical adjustments we made to address market conditions are working. We have optimized price points, closed price gaps, and strengthened merchandising. Consumers continue to respond positively to these actions and to our brand-building initiatives, product innovations, and new brand additions. We are well-poised for the holiday season and another year of growth."
Net sales increased 8 percent in the second quarter of 2013, compared to the second quarter of 2012, due to the impact of the acquired Sara Lee foodservice business and favorable sales mix. Overall net price realization was slightly lower as price declines on coffee offset increases taken on peanut butter over the past year. Volume gains realized in Folgers® coffee, Robin Hood® and Five Roses® flour in Canada, and Dunkin' Donuts® packaged coffee were offset by decreases in Pillsbury® baking mixes, Crisco® shortening and oils, Jif® peanut butter, and Smucker's® fruit spreads. Overall volume, based on weight and excluding acquisition, decreased 2 percent in the second quarter of 2013, compared to the second quarter of 2012. Favorable sales mix in the quarter was driven by volume growth in the company's coffee brands, including K-Cups®, which are higher priced per pound, compared to other products within the Company's portfolio.
Gross profit increased $43.2 million, or 9 percent, in the second quarter of 2013, compared to 2012. Excluding special project costs, gross profit increased $33.0 million, or 6 percent, driven by the acquired Sara Lee foodservice business and strong coffee growth. Gross margin was 33.4 percent in the second quarter of 2013, compared to 33.8 percent in the second quarter of 2012, excluding special project costs.
Overall commodity costs were slightly lower during the second quarter of 2013, compared to the second quarter of 2012, as lower green coffee costs offset higher costs for peanuts and certain other commodities. However, the benefit to gross profit of overall lower costs was mostly offset by lower overall net price realization. Unrealized mark-to-market adjustments on derivative contracts did not contribute to the change in year-over-year gross profit and were a loss of $10.3 million in the second quarter of 2013, compared to a loss of $10.2 million in the second quarter of 2012.