Earnings Labs

The J. M. Smucker Company (SJM)

Q4 2024 Earnings Call· Thu, Jun 6, 2024

$97.73

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Transcript

Aaron Broholm

Operator

Good morning, this is Aaron Broholm, Vice President, Investor Relations for The J. M. Smucker Company. Thank you for listening to our prepared remarks on our Fiscal 2024 Fourth Quarter Earnings. After this brief introduction, Mark Smucker, Chair of the Board, President and Chief Executive Officer, will provide a business and strategy update. Tucker Marshall, Chief Financial Officer, will then provide a detailed analysis of the financial results and our fiscal 2025 outlook. Later this morning, we will hold a separate, live question-and-answer webcast. During today’s discussion, we will make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, please note we will refer to non-GAAP financial measures management uses to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning’s press release. Today’s press release, a supplementary slide deck, management’s prepared remarks, and the Q&A webcast can all be accessed on our Investor Relations website at jmsmucker.com. We invite all interested parties to join us at 9:00 am Eastern Time today for a live question-and-answer session with management to further discuss our fourth quarter results and next year’s outlook for fiscal year 2025. I will now turn the discussion over to Mark Smucker.

Mark Smucker

Analyst

Thank you, Aaron, and good morning, everyone. Today, I will first summarize our full-year performance and then provide highlights on our fourth quarter results. I will also share why we are confident in continuing to deliver sales and earnings growth in fiscal year 2025, while investing to strengthen our brands and expand our key growth platforms. Tucker will then provide additional detail on our fourth quarter results and next fiscal year’s outlook. Fiscal 2024 was a year of significant progress as we achieved our near-term goals and strengthened our business for the long-term. Our performance reflects topline growth supported by consumer demand for our portfolio of leading brands and bottom line results that exceeded our expectations, including a better than anticipated fourth quarter. Full-year comparable net sales increased 8% with volume/mix growth across all of our U.S. Retail segments and our International and Away From Home businesses. Full-year adjusted earnings per share was $9.94, reflecting a double-digit percentage increase versus the prior year. Our results reaffirm that our strategy is working, as we continue to execute and deliver results in a dynamic consumer environment. Notably, we continued to transform our portfolio to increase focus on the strategy of building brands consumers love and establishing leading positions in the advantaged categories of coffee, snacking, and pet foods. With the acquisition of Hostess Brands, the Company gained leadership in the highly-attractive snacking market. Our entry into this category also amplifies our focus on convenient food and beverage occasions allowing us to meet consumer preferences and needs across all parts of the day. The acquisition also supports the delivery of our long-term financial goals by increasing our scale, profitability, and cash flow. We also refined our strategic priorities to better align the organization: First, deliver the business, which includes a focus on growing…

Tucker Marshall

Analyst

Thank you, Mark. Good morning, everyone. I’ll begin by giving an overview of our fourth quarter results, then I’ll provide additional details on our financial outlook for fiscal year 2025. In the quarter, net sales declined 1%. Comparable net sales increased 3%, excluding the prior year sales related to the divested businesses, current year sales for the Hostess acquisition, and foreign currency exchange. The increase in comparable net sales reflects a 2 percentage point increase from higher net price realization, primarily for Frozen Handheld and Spreads, Pet Foods, and International and Away From Home, partially offset by lower net price realization for Coffee. Favorable volume/mix increased net sales by 1%, primarily driven by Uncrustables sandwiches, contract manufacturing sales related to the divested pet food brands, Café Bustelo coffee, and Meow Mix cat food. This increase was partially offset by Folgers coffee, Jif peanut butter, and Smucker's fruit spreads. Adjusted gross profit increased to $117 million, or 15%, compared to the prior year. The increase primarily reflects a favorable impact from the acquisition of Hostess Brands, lower costs, higher net price realization, and favorable volume/mix, partially offset by the impact of divestitures. Adjusted operating income increased $53 million, or 13%, reflecting the increased gross profit, partially offset by higher SD&A expenses. The increase in SD&A was primarily driven by the acquisition of Hostess Brands, increased investments in marketing, and pre-production expenses related to the new Uncrustables manufacturing facility, partially offset by the impact of divestitures. Below operating income, net interest expense increased $62 million, primarily due to an increase in interest expense related to debt issued to partially finance the acquisition of Hostess Brands. The adjusted effective income tax rate was 23.2%, compared to 23.8% in the prior year. Factoring in all these considerations, along with weighted average shares outstanding of…

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Analyst