J.M. Smucker Co. (NYSE: SJM) released its financial results for the third quarter ending on January 31, 2024, of the 2024 fiscal year, including significant business developments such as the divestiture of the Canada condiment business, acquisition of Hostess Brands, Inc., divestiture of the Sahale Snacks® business, and certain pet food brands divestiture. Here’s a breakdown of the key points:
Summary:
- Net sales increased by $12.9 million, or 1 percent. Excluding the impact of acquisitions, divestitures, and currency exchange, net sales saw a 6 percent increase.
- Net income per diluted share stood at $1.13, with adjusted earnings per share rising to $2.48, marking a 12 percent increase.
- Cash provided by operations amounted to $406.5 million, down from $584.6 million in the previous year. Free cash flow decreased to $249.6 million from $442.7 million in the prior year.
- The company provided an updated financial outlook for the full fiscal year 2024.
CEO Comments: Mark Smucker, Chair of the Board, President, and CEO, expressed satisfaction with the strong financial results driven by strategic priorities, brand loyalty, and volume growth across business segments. The completion of the Hostess Brands acquisition and two divestitures aligns with the company’s focus on coffee, snacking, and pet foods.
Sales Performance:
- Net sales increased by $12.9 million, with comparable net sales rising by 6 percent, excluding non-comparable net sales from divestitures and acquisitions. Volume/mix contributed significantly to the growth, driven by Meow Mix® cat food, contract manufacturing, and the Café Bustelo® brand.
- Net price realization also improved, primarily due to list price increases across various segments.
Operating Income:
- Gross profit increased by 9 percent, attributed to the Hostess Brands acquisition, improved net price realization, favorable volume/mix, and lower costs. However, operating income decreased by 6 percent, mainly due to increased special project costs related to the Hostess Brands integration.
- Adjusted gross profit rose by 12 percent, and adjusted operating income increased by 28 percent compared to GAAP results.
Interest, Debt, and Taxes:
- Net interest expense surged by $61.9 million due to increased interest expense related to financing the Hostess Brands acquisition.
- The effective income tax rate increased to 38.4 percent, primarily due to one-time adjustments associated with the acquisition, while the adjusted effective income tax rate stood at 26.1 percent.
Cash Flow and Debt:
- Cash provided by operating activities decreased to $406.5 million, primarily due to increased working capital requirements and lower adjusted net income. Free cash flow also declined to $249.6 million, reflecting the decrease in cash provided by operating activities and higher capital expenditures.
This comprehensive report highlights the company’s strategic maneuvers, financial performance, and future outlook for sustainable growth and shareholder value.
