US confectioner Hershey has raised its full-year profit outlook despite reporting a 10% drop in third-quarter earnings.
In the three months to the end of September, net profit slumped 79.8% to US$176.7m, while EBIT fell 6% to $301.7m.
The quarter included charges of $68.4m related to its ongoing expansion and realignment efforts.
However, consolidated net sales amounted to $1.75bn, an 8% increase on the prior year.
"The Hershey Company delivered another good quarter of core brand growth driven by solid performance within key retail channels," said John Bilbrey, president and CEO. "Our performance was solid in the convenience and dollar store channels with volume and unit trends positive."
Hershey said it expects EPS for the current year to be in the range of $3.22 to $3.25. It had previously said it would earn $3.17 to $3.23 per share.
Hershey's share price was down 0.31% to $69.90 at 11:53 ET.
Hershey Announces Third Quarter Results; Updates Outlook for 2012
Net sales increase 7.5%
Earnings per share-diluted of $0.77 as reported and $0.87 adjusted
Full year net sales growth range narrowed; expected to increase 8-9%, including Brookside acquisition
Outlook for 2012 reported and adjusted earnings per share-diluted updated:
Reported earnings per share-diluted expected to be $2.87 to $2.92
Adjusted earnings per share-diluted expected to increase 14-15% and be in the $3.22 to $3.25 range, greater than the previous estimate of a 12-14% increase
Quarterly dividend declared and increased 10.5% on Common Stock
2013 net sales and adjusted earnings per share-diluted expected to be within the Company's long-term targets
HERSHEY, Pa.--(BUSINESS WIRE)--The Hershey Company (NYSE: HSY) today announced sales and earnings for the third quarter ended September 30, 2012. Consolidated net sales were $1,746,709,000 compared with $1,624,249,000 for the third quarter of 2011. Reported net income for the third quarter of 2012 was $176,716,000 or $0.77 per share-diluted, compared with $196,695,000 or $0.86 per share-diluted for the comparable period of 2011.
"The Hershey Company delivered another good quarter of core brand growth driven by solid performance within key retail channels"
As described in the Note, for the third quarter of 2012, these results, prepared in accordance with U.S. generally accepted accounting principles (GAAP), included net pre-tax charges, as well as non-service-related pension expense (NSRPE). The majority of these charges, $25.8 million, or $0.07 per share-diluted, were related to the Project Next Century program. Additionally, acquisition and integration costs related to the Brookside Foods Ltd. (Brookside) acquisition were $4.8 million, or $0.02 per share-diluted, and NSRPE was $4.3 million, or $0.01 per share-diluted. For the third quarter of 2011, results included pre-tax charges for Project Next Century of $13.5 million, or $0.03 per share-diluted, and a pre-tax gain of $17.0 million, or $0.05 per share-diluted, on the sale of a non-core trademark license. Adjusted net income, which excludes these net charges, was $199,451,000, or $0.87 per share-diluted, in the third quarter of 2012, compared with $193,959,000, or $0.84 per share-diluted, in the third quarter of 2011, an increase of 3.6 percent in adjusted earnings per share-diluted. See the Note for a reconciliation of GAAP and non-GAAP items.
For the first nine months of 2012, consolidated net sales were $4,893,217,000, compared with $4,513,643,000 for the first nine months of 2011. Reported net income for the first nine months of 2012 was $511,052,000, or $2.23 per share-diluted, compared with $486,829,000 or $2.12 per share-diluted, for the first nine months of 2011. As described in the Note, for the first nine months of 2012 and 2011, these results, prepared in accordance with GAAP, included net pre-tax charges of $93.4 million and $6.3 million, or $0.27 and $0.01 per share-diluted, respectively. Charges associated with the Project Next Century program for the first nine months in 2012 and 2011 were $68.4 million and $21.4 million, or $0.19 and $0.06 per share-diluted, respectively. NSRPE for the first nine months in 2012 and 2011 were $13.0 million, or $0.04 per share-diluted, and $1.9 million, respectively. Additionally, for the first nine months of 2012, acquisition and integration costs related to the Brookside acquisition were $12.0 million, or $0.04 per share-diluted. Charges in 2011 include the previously mentioned pre-tax gain on the sale of non-core trademark licensing rights. As described in the Note, adjusted net income for the first nine months of 2012, which excludes these net charges, was $570,854,000, or $2.50 per share-diluted. Adjusted net income for the first nine months of 2011, which excludes these net charges and the gain on sale, was $490,381,000, or $2.13 per share-diluted in 2011.
In 2012, the Company expects reported earnings per share-diluted of $2.87 to $2.92. These results, prepared in accordance with GAAP, include business realignment charges, NSRPE and acquisition and integration costs of $0.33 to $0.35 per share-diluted. The majority of these charges, $0.23 to $0.24 per share-diluted, are related to the Project Next Century program. NSRPE and acquisition and integration costs related to the Brookside acquisition are expected to be $0.06 per share-diluted and $0.04 to $0.05 per share-diluted, respectively. Despite the impact of these charges in 2012, reported gross margin is expected to increase 120 to 140 basis points. In 2013, the Company expects reported earnings per share-diluted of $3.37 to $3.49. These results are expected to include business realignment charges, NSRPE and acquisition and integration costs of $0.09 to $0.11 per share-diluted.
As discussed last quarter, the forecasted amount for Project Next Century non-cash pension settlement charges could increase as a result of impacted employee pension fund withdrawals during the fourth quarter. Non-cash pension settlement costs are required in accordance with applicable accounting standards. As a result, the forecast for total pre-tax GAAP charges and non-recurring project implementation costs, including non-cash pension settlement costs related to the Project Next Century program, has been increased from a range of $160 million to $180 million to a range of $190 million to $200 million. The expected timing of events and estimated costs and savings is included in Appendix I, which is attached to this press release.
On October 24, 2012, the Board of Directors of The Hershey Company declared a quarterly dividend of $0.42 on the Common Stock, an increase of $0.04 per share. In addition, the Board declared a dividend of $0.38 on the Class B Common Stock, an increase of $0.036 per share. The dividends are payable December 14, 2012, to stockholders of record November 23, 2012.
