J. M. Smucker Sees 6 Percent Net Sales Increase In Third Quarter
The J. M. Smucker Co. announced results for the third quarter ended Jan. 31, 2013, of its 2013 fiscal year. Results for the quarter and nine months ended Jan. 31, 2013 and 2012, include the operations of the North American foodservice coffee and hot beverage business acquired from Sara Lee Corporation since the completion of the acquisition on Jan. 3, 2012.
Net sales increased six percent in the third quarter of 2013, compared to the third quarter of 2012, primarily due to the Sara Lee foodservice business acquisition and favorable sales mix. As a result of the acquisition in January of last year, an additional two months of net sales, totaling $59.7 million, were recognized in the third quarter of 2013.
Favorable sales mix in the quarter was driven by the company’s K-Cups® and peanut butter products, which are higher priced per pound, compared to other products within the company’s portfolio. Overall net price realization was lower primarily due to price declines on coffee taken earlier in the fiscal year. Volume gains realized in Jif® peanut butter and Smucker’s® fruit spreads were offset by decreases in the Pillsbury® brand and the Canadian Robin Hood® and Five Roses® flour brands. Overall volume, based on weight and excluding the incremental impact of the acquisition, decreased one percent in the third quarter of 2013, compared to the third quarter of 2012.
Gross profit increased $70.5 million, or 15 percent, in the third quarter of 2013, compared to 2012, due to favorable mix, lower commodity costs, the impact of an additional two months of the Sara Lee foodservice business, and a decrease in special project costs. Excluding special project costs, gross profit increased $58.6 million, or 12 percent, and improved to 34.5 percent of net sales in the third quarter of 2013, compared to 32.6 percent in the third quarter of 2012.
Overall lower commodity costs during the third quarter of 2013, compared to the third quarter of 2012, were driven by green coffee offset somewhat by higher peanut costs. The favorable net impact of lower green coffee costs on gross profit was primarily timing related. The company reduced coffee prices in May 2012 with the expectation that it would recognize lower green coffee costs as it progressed through its fiscal year. The actual realization of these lower costs during the quarter, in large part, offset the unfavorable impact realized earlier in the year. Unrealized mark-to-market adjustments on derivative contracts were a loss of $0.5 million in the third quarter of 2013, compared to a gain of $2.1 million in the third quarter of 2012.
Total selling, distribution, and administrative expenses increased 12 percent in the third quarter of 2013, compared to the third quarter of 2012, and increased as a percentage of net sales from 15.3 percent to 16.1 percent. Marketing, selling, and distribution expenses increased 6 percent, 10 percent, and 5 percent, respectively, and were primarily driven by the acquired Sara Lee foodservice business. General and administrative expenses increased 21 percent due to increased incentive compensation and employee benefit costs. Higher amortization expense was recognized in the third quarter of 2013, compared to 2012, primarily related to the intangible assets associated with the Sara Lee foodservice business acquisition.
Operating income increased $57.9 million in the third quarter of 2013, compared to 2012. Excluding special project costs in both periods, operating income increased $33.4 million, or 14 percent, and increased from 15.9 percent of net sales in 2012 to 17.1 percent in 2013.
