JM Smucker's earnings profit from Multifoods purchase
producer of jams, jellies and preserves JM Smucker, according to
results out last Friday.
The Orville, Ohio based company said that the purchase contributed $187.6 million to sales in the third quarter, pushing overall sales up 60 percent compared to the same period last year.
However, without this acquisition, sales were up a comparatively slight five percent and Smucker said that sales growth and improved margins were "mostly offset by merger and integration costs, an increase in restructuring expenses, higher raw material costs", plus start-up costs generated by the creation of an Uncrustables plant in Scotsville, Kentucky.
Net income rose to $36.1 million, or 61 cents per share, from $31.3 million, or 62 cents per share, a year ago.
Sales in the US retail market segment rose 50 percent to $381.4 million from $254.3 million in the third quarter of 2004, with the Multifoods' brands contributing $111.2 million in sales. Sales of Smucker's, Jif and Crisco combined to increase over six percent compared to last year.
"Our Smucker's, Jif and Crisco brands experienced good sales growth in the quarter and the new brands we acquired from Multifoods continued to perform well," said Tim Smucker, the company's co-chief executive officer.
He added that the decision to sell its foodservice and bakery products business acquired from Multifoods, in addition to its industrial businesses, and to close its Salinas, California plant later this year, should improve profiability in the future.
The company said in January that it had found a buyer for its US foodservice and bakery products businesses and its Canadian Gourmet Baker operations, namely to Value Creation Partners of Columbus, Ohio. The sale, it said, was to be worth around $43 million.
The foodservice and bakery products businesses include the manufacturing, marketing and distribution of baking mixes, frozen baked goods such as muffins, cakes, doughs, as well as frostings, to restaurants, retail and wholesale bakers, and other commercial customers in the US and Canada.
"The company's strategy is to own and market leading North American icon food brands sold in the center of the store. The US industrial business is not branded and thus does not fit within our strategy," spokeswoman Kim Baker told FoodNavigatorUSA.com.
Smucker said in a statement that it had worked over the past two years to improve its business margins by exiting low margin contracts in excess of $50 million, but has nonetheless decided it is necessary to sell its industrial business.
The company does not believe that these actions will have an important effect on the business and noted in a statement that industrial sales planned for 2005 are around $60 million.
JM Smucker is perhaps best known for its fruit spreads, peanut butter, shortening and oils, ice cream toppings, and health and natural foods and sold under the brands of Smucker's, Jif and Crisco. Since June 2004, Pillsbury baking mixes and frostings, Hungry Jack pancake mixes, syrups and potato side dishes and Martha White baking mixes and ingredients have been part of the company
