Hershey(HSY) - 2024 Q2 - Quarterly Report

Financial Performance - Net sales for Q2 2024 were $2,074.5 million, a decrease of 16.7$2,490.3 million in Q2 2023, primarily due to an 18% volume decline [153]. - Gross profit decreased to $833.8 million in Q2 2024, down 26.4$1,132.1 million in Q2 2023, with a gross margin of 40.2% compared to 45.5% in the prior year [153]. - Operating profit fell to $287.9 million in Q2 2024, a decrease of 48.7$560.6 million in Q2 2023, resulting in an operating profit margin of 13.9% [161]. - Net income for Q2 2024 was $180.9 million, down 55.6$406.9 million in Q2 2023, with diluted net income per share of $0.89 compared to$1.98 [153]. - Net sales for the first six months of 2024 were $5,327.2 million, down$150.7 million or 2.8% from $5,477.9 million in the same period of 2023, primarily due to a volume decrease of approximately 6$1,345.9 million, a decrease of $14.7 million or 1.1$1,360.6 million in the same period of 2023, with operating profit margin increasing to 25.3% [171]. - Net income was $978.3 million in the first six months of 2024, a decrease of$15.9 million, or 1.6%, compared to $994.2 million in the same period of 2023 [175]. Tax and Expenses - The effective income tax rate increased to 26.4$541.0 million in Q2 2024, with a notable 15.4% reduction in advertising expenses [159]. - Net interest expense rose to $81.2 million in the first six months of 2024, an increase of$6.9 million or 9.2% compared to $74.3 million in the same period of 2023, due to higher rates on short-term and long-term debt [172]. - Unallocated corporate expense decreased by$29.3 million, or 8.1%, to $334.4 million in the first six months of 2024, primarily due to lower acquisition and integration-related costs [194]. Segment Performance - North America Confectionery segment net sales were$1,579.8 million in Q2 2024, down $413.3 million or 20.7$1,993.1 million in Q2 2023, primarily due to volume declines [180]. - North America Salty Snacks segment net sales increased by $22.6 million, or 4.2$565.0 million in the first six months of 2024, reflecting volume growth of approximately 5% [187]. - International segment net sales decreased by $15.2 million, or 3.1$475.1 million in the first six months of 2024, driven by volume declines of approximately 10% [192]. - Total segment income for the first six months of 2024 was $1,571.4 million, a decrease of$160.2 million or 9.2% compared to $1,731.6 million in the same period of 2023 [176]. Cash Flow and Capital Expenditures - Cash and cash equivalents totaled$467.1 million at June 30, 2024, an increase of $65.1 million compared to the 2023 year-end balance [195]. - Operating activities generated cash of$894.7 million in the first six months of 2024, a decrease of $155.1 million compared to$1,049.8 million in the same period of 2023 [199]. - Capital expenditures were $343.5 million in the first six months of 2024, an increase from$330.5 million in the same period of 2023, with expectations for 2024 capital expenditures to approximate $600 million to$625 million [201]. Shareholder Activities - Total dividend payments increased to $543.9 million in the first six months of 2024, an increase of$130.4 million compared to $413.5 million in the same period of 2023 [203]. - The company repurchased shares worth$494.2 million in the first six months of 2024, compared to $239.9 million in the same period of 2023 [206]. - The company completed a$500 million share repurchase authorization in March 2024, with approximately $470 million remaining under the new December 2023 authorization [208]. Market Conditions and Risks - Cocoa product prices increased approximately 75% since the beginning of 2024, contributing to gross margin pressures [149]. - The ongoing conflict between Russia and Ukraine has not materially impacted commodity prices or supply availability as of June 30, 2024 [150]. - The company is subject to various risks including supply chain disruptions, increased raw material costs, and competition, which could impact future financial results [213]. - The company anticipates that market demand for new and existing products may decline, affecting overall business performance [214].