JM Smucker Co (SJM) Reports Mixed Fiscal 2024 Q2 Results Amid Brand Divestitures and Acquisitions
Net sales decreased by 12% due to divestitures, but comparable net sales excluding these factors increased by 7%.
Adjusted earnings per share saw an 8% increase, rising to $2.59.
Free cash flow declined to $28.2 million from $102.9 million in the prior year.
JM Smucker Co (NYSE:SJM) updates full-year fiscal 2024 outlook, reflecting the acquisition of Hostess Brands.
On December 5, 2023, JM Smucker Co (NYSE:SJM) released its 8-K filing, announcing the second quarter results for the fiscal year 2024, which ended on October 31, 2023. The results showcased the impact of the divestiture of certain pet food brands and the acquisition of Hostess Brands, Inc.
Financial Highlights and Challenges
For the second quarter, JM Smucker Co (NYSE:SJM) reported a net sales decrease of $266.5 million, or 12%, primarily due to the divestiture of certain pet food brands. However, when excluding the divestiture and foreign currency exchange, net sales increased by 7%. Net income per diluted share was $1.90, while adjusted earnings per share increased by 8% to $2.59.
Operational Performance
Operating income saw a modest increase of 2%, amounting to $298.9 million, while adjusted operating income also rose by 2% to $385.4 million. The company experienced a gross profit increase of 3%, attributed to higher net price realization, lower green coffee costs, and favorable volume/mix, despite the impact of divested pet food brands.
Cash Flow and Outlook Adjustments
Cash provided by operations was $176.9 million, a decrease from the prior year's $205.0 million. Free cash flow also saw a significant drop to $28.2 million from the previous year's $102.9 million. The full-year fiscal 2024 outlook has been updated to reflect the Hostess Brands acquisition, with an expected comparable net sales increase of 8.5% to 9.0%, adjusted earnings per share between $9.25 and $9.65, and free cash flow of approximately $530 million.
Segment Performance
The U.S. Retail Coffee segment experienced a 3% decrease in net sales, while the segment profit decreased by 9%. The U.S. Retail Consumer Foods segment saw a 7% increase in net sales and a 28% increase in segment profit. The U.S. Retail Pet Foods segment reported a 39% decrease in net sales due to divestitures, but a 20% increase when excluding these factors. The International and Away From Home segment enjoyed a 9% increase in net sales and a 45% increase in segment profit.
Executive Commentary
Mark Smucker, Chair of the Board, President, and Chief Executive Officer, commented on the results, stating,
Our second quarter results reflect the continued demand for our iconic brands, our focus on executing with excellence, and the talent of our employees. Our continued business momentum gives us confidence in our ability to achieve our sales and earnings expectations for this fiscal year."
He further added,
We also advanced our portfolio reshape activities, including the acquisition of the Hostess sweet baked snacks and Voortman cookie brands. We are confident in our ability to capitalize on synergies and growth opportunities across snacking, while also continuing to support our other growth platforms in coffee and pet. Our transformed portfolio improves our ability to deliver long-term sustainable growth and shareholder value."
Conclusion
The second quarter results for JM Smucker Co (NYSE:SJM) present a mixed picture, with net sales impacted by divestitures but showing underlying growth when these factors are excluded. Adjusted earnings per share have increased, reflecting the company's ability to manage costs and realize higher net prices. The updated outlook for fiscal 2024 indicates confidence in the company's strategic direction, including the integration of Hostess Brands. Investors and stakeholders will be watching closely to see how these changes translate into long-term value.
Explore the complete 8-K earnings release (here) from JM Smucker Co for further details.
This article first appeared on GuruFocus.
