August 14, 2008 / 4:10 PM / in 10 years

UPDATE 3-Smucker Q1 beats Street, backs FY09 view; shares rise

(Adds details, analyst’s comments, updates share movement)

By Dilipp S. Nag

BANGALORE, Aug 14 (Reuters) - Peanut butter and jelly maker J.M. Smucker Co (SJM.N) posted better-than-expected quarterly results, as price increases and acquisitions helped offset rising commodity costs, and reaffirmed its fiscal 2009 outlook, sending its shares up 9 percent.

Smucker, known for its namesake jellies and jams, has raised prices of its products over the last several months as it grapples with soaring commodity costs.

The price rises and moderating input costs put the company in a better position going forward, said William Blair & Co analyst Jon Andersen by phone.

The company, which competes with Nestle NESN.VX and Unilever Plc (ULVR.L) (UNc.AS), has been on an acquisition spree to boost sales. It recently agreed to buy Folgers, the largest U.S. coffee business, from Procter & Gamble Co (PG.N). In May, it bought ConAgra Foods Inc’s (CAG.N) Knott’s Berry Farm food brand.

For the first quarter ended July 31, Smucker reported net income of $42.3 million, or 77 cents a share, compared with $40.8 million, or 71 cents a share, a year earlier.

Excluding restructuring, merger and integration costs, the company earned 82 cents a share.

Net sales rose 18 percent to $663.7 million, driven by its acquisitions of the Canadian Carnation canned milk business, Europe’s Best Inc and Knott’s Berry Farm.

Analysts on average expected earnings of 77 cents a share, before exceptional items, on revenue of $646.9 million, according to Reuters Estimates.

Several categories including Smucker’s fruit spreads and Uncrustables sandwiches, Pillsbury baking mixes and frostings, and Hungry Jack potatoes and pancakes recorded higher volumes during the quarter. However, volume declined in oils and peanut butter categories, the company said.

Analyst Andersen said cash-strapped consumers are spending more on food in a grocery store than in restaurants, a trend that is helping branded packaged food manufacturers.


Smucker, which also makes Jif peanut butter and Crisco shortening brands, said it expects a profit of $3.45 to $3.50 a share for fiscal 2009, before one-time costs associated with the Folgers acquisition.

It sees net sales of $3.8 billion to $4.0 billion for the period, assuming the Folgers deal closes in the fourth quarter of calendar year 2008.

Analysts were expecting a profit of $3.44 a share, before items, on revenue of $3.86 billion.

“Folgers will be our largest brand, with sales in excess of $1.5 billion, and builds on our center of the store focus,” Tim Smucker, chairman and co-CEO, said in a statement.

The company expects to achieve cost savings of $80 million from the Folgers deal, a company executive said in a conference call with analysts.

“The shares could outperform on a relative basis particularly, if the company executes and integrates the Folgers transaction in an effective fashion,” said Andersen, who has a “market perform” rating on the stock.

William Blair is a market maker in Smucker shares.

Smucker’s shares rose to a high of $54.82 before paring some gains and were up $3.25 at $53.75 in midday trade on the New York Stock Exchange.

The stock has gained 36 percent since July when it had touched a 52-week low of $40.25, outperforming the Standard & Poor’s packaged foods index .15GSPFOOD, which is up 14 percent. (Editing by Bernard Orr, Himani Sarkar and Deepak Kannan)

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