The J.M. Smucker Co. announced results for the fourth quarter of its 2022 fiscal year ending April 30, 2022. Financial results for the fourth quarter and fiscal year reflect the divestitures of the natural beverage and grains businesses on January 31, 2022, the private label dry pet food business on December 1, 2021, the Natural Balance business on January 29, 2021, and the Crisco business on December 1, 2020. All comparisons are to the fourth quarter of the prior fiscal year, unless otherwise noted.
Executive summary
- Net sales increased $113.6 million, or 6%. Net sales excluding the impact of divestitures and foreign currency exchange increased 9%.
- For the full year, net sales were $8.0 billion, in-line with the prior year. Net sales excluding the impact of divestitures and foreign currency exchange increased 5%.
- Net income per diluted share for the quarter was $1.87. Adjusted earnings per share was $2.23, an increase of 18%.
- For the full year, net income per diluted share was $5.83. Adjusted earnings per share was $8.88, a decrease of 3%.
- Cash from operations was $393.7 million compared to $291.0 million in the prior year. Free cash flow was $220.7 million in the quarter and $718.8 million for the full year.
- Return of capital to shareholders, reflecting cash dividends and share repurchases, was $369.7 million in the quarter and $688.5 million for the full year.
- The company provided its fiscal year 2023 outlook, with an expected net sales increase of 3.5 to 4.5%, adjusted earnings per share to range from $7.85 to $8.25, and free cash flow of $500 million.
- Guidance reflects an estimated unfavorable impact to sales of 2% and adjusted earnings per share of $0.90 related to the recall of certain Jif peanut butter products.
CEO remarks
"Our fourth quarter and full-year results demonstrate the continued execution of our strategy and momentum of the business, amid a challenging and dynamic environment. Our strong financial results reflect sustained consumer demand for at-home food and coffee and consumers' desire for our trusted and iconic brands," Mark Smucker, president and chief executive officer, said in the announcement. "During the year, we also made significant progress in strengthening our financial position, as we reduced our debt balance, while also returning cash to our shareholders through dividends and share repurchases."
"Looking ahead to fiscal year 2023, we are focused on continuing the momentum of the business, investing in growth focused platforms such as Uncrustables, partnering with retailers to restock Jif products following the recent recall, and supporting our talented employees who are instrumental to our success. With strong underlying momentum across our portfolio of brands, we remain confident in our ability to execute our strategic priorities and support long-term shareholder value creation."
Fourth-quarter consolidated results (A)
(A) Subsequent to April 30, 2022, the company initiated a voluntary recall of select Jif peanut butter products produced at its Lexington, Kentucky, facility and sold primarily in the U.S. due to potential salmonella contamination. As a result, it recorded reserves of $52.3 million in its consolidated financial statements as of April 30, 2022, within its U.S. Retail Consumer Foods segment, which was inclusive of unsaleable inventory, estimated customer returns, and consumer refunds. The company anticipates these costs will be recovered by insurance, and as a result, an insurance receivable of $49.8 million, net of the deductible, was also recorded as of April 30, 2022.
Based on the company’s best estimates, in fiscal year 2023, we anticipate an additional unfavorable impact of approximately $125.0 million, net of the remaining anticipated insurance recoveries, primarily related to the estimated impact of manufacturing downtime, customer returns, and unsaleable inventory, as well as other recall related costs. The ultimate impact from the Jif peanut butter recall could differ materially from these estimates.
Net sales
Net sales increased 6%, including a 1% unfavorable impact of estimated customer returns related to the Jif peanut butter product recall. Excluding noncomparable net sales in the prior year of $59.9 million for the divested private label dry pet food and natural beverage and grains businesses, as well as a decreased contribution from foreign currency exchange of $0.7 million, net sales increased $174.2 million, or 9%.
The increase in comparable net sales was primarily driven by a 10 percentage point increase from net price realization, driven by each of the company's business segments, reflecting list price increases. The favorable net price realization was partially offset by a 1%age point decrease from volume/mix.
Fourth-quarter segment results
U.S. retail coffee
Net sales increased $64.1 million, or 11%. Higher net price realization increased net sales by 17%age points, primarily reflecting list price increases across the portfolio. A reduced contribution from volume/mix decreased net sales by 6%age points, primarily driven by the Folgers and Dunkin' brands.
Segment profit decreased $9.5 million, primarily reflecting a decreased contribution from volume/mix, partially offset by the net impact of higher net price realization and increased commodity costs.
U.S. retail consumer foods
Net sales decreased $22.5 million, or 5%, including a 5% unfavorable impact of estimated customer returns related to the Jif peanut butter product recall. Excluding $33.3 million of noncomparable net sales in the prior year related to the divested natural beverage and grains businesses, net sales increased $10.8 million, or 3%. Volume/mix increased net sales by 2 percentage points, primarily driven by Jif peanut butter, partially offset by decreases for Smucker's Uncrustables frozen sandwiches and Smucker's fruit spreads. Net price realization increased sales by 1 percentage point, primarily driven by Smucker's Uncrustables frozen sandwiches and Smucker's fruit spreads, including the unfavorable impact of estimated customer returns related to the Jif peanut butter product recall.
Segment profit increased $0.2 million, primarily reflecting lower marketing spend and favorable volume/mix, offset by the net impact of higher net price realization and increased commodity and ingredient, manufacturing, and packaging costs and the noncomparable segment profit in the prior year related to the divested natural beverage and grains businesses. Segment profit also reflects the unfavorable impact of unsaleable inventory, estimated customer returns, and consumer refunds, mostly offset by an anticipated insurance recovery, net of deductible, related to the Jif peanut butter product recall as of April 30, 2022.
International and away from home
Net sales increased $28.5 million, or 12%. Excluding $2.2 million of noncomparable net sales in the prior year related to the divested natural beverage and grains businesses and unfavorable foreign currency exchange of $0.7 million, net sales increased $31.4 million, or 13%. Volume/mix for the combined businesses increased net sales by 7 percentage points, primarily driven by increases for portion control spreads, flour and baking, fruit spreads and coffee products. Net price realization across the majority of the portfolio contributed 6 percentage points to net sales for the combined businesses.
Segment profit increased $5.3 million, primarily reflecting favorable volume/mix and the net impact of higher net price realization and increased commodity costs.
