J. M. Smucker(SJM) - 2024 Q3 - Quarterly Results

Fiscal 2024 Third Quarter Financial Results Executive Summary & CEO Remarks The J.M. Smucker Co. reported strong Q3 FY2024 results with 1% net sales growth and 12% adjusted EPS increase, driven by strategic portfolio adjustments and brand loyalty | Metric | Q3 FY2024 | Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $2,229.2M | +1% | | Net Sales (Comparable) | - | +6% | | Net Income per Diluted Share | $1.13 | -42% | | Adjusted Earnings per Share | $2.48 | +12% | | Cash Provided by Operations | $406.5M | -30.5% | | Free Cash Flow | $249.6M | -43.6% | - The company completed the acquisition of Hostess Brands and two divestitures (Canada condiment business and Sahale Snacks business) during the quarter[1][3] - CEO Mark Smucker highlighted that the strong results were driven by focused execution, sustained brand loyalty, and volume growth across the business, reinforcing the strategic focus on coffee, snacking, and pet foods[3] Consolidated Financial Performance (Q3 FY2024) Q3 FY2024 consolidated net sales increased 1% to $2.23 billion, with adjusted operating income up 28% despite a 6% GAAP operating income decline due to acquisition costs | Metric | Q3 FY2024 ($M) | Q3 FY2023 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,229.2 | $2,216.3 | 1% | | Operating Income | $297.4 | $317.9 | (6)% | | Adjusted Operating Income | $457.5 | $357.6 | 28% | - Comparable net sales increased 6%, reflecting a 4 percentage point increase from volume/mix (led by Meow Mix and Café Bustelo) and a 2 percentage point increase from net price realization[6][7] - Operating income decreased by 6%, primarily driven by a $98.3 million increase in special project costs related to the Hostess Brands acquisition, which offset a 9% increase in gross profit[8] - Cash provided by operating activities declined to $406.5 million from $584.6 million year-over-year, mainly due to increased cash required for working capital[12] Full-Year Fiscal 2024 Outlook Full-year FY2024 guidance updated, with adjusted EPS narrowed to $9.45-$9.65, comparable net sales growth at 8.75%, and free cash flow revised to $500 million | Metric | Current Guidance | Previous Guidance | | :--- | :--- | :--- | | Comparable Net Sales Increase | ~8.75% | 8.5% - 9.0% | | Adjusted Earnings Per Share | $9.45 - $9.65 | $9.25 - $9.65 | | Free Cash Flow | ~$500M | ~$530M | | Capital Expenditures | ~$610M | ~$610M | - The Hostess Brands acquisition is expected to have a net unfavorable impact of approximately $0.40 on adjusted EPS for the fiscal year[14] - Guidance assumes an adjusted gross profit margin of approximately 37.5% and an adjusted effective income tax rate of 24.6%[15] Segment Performance Analysis (Q3 FY2024) Q3 segment performance varied, with strong comparable sales growth in U.S. Retail Pet Foods (+20%) and International (+9%), while U.S. Retail Coffee declined 1% - Total segment profit increased to $539.8 million from $444.7 million in the prior year, driven by growth across most segments and the addition of Sweet Baked Snacks[34] U.S. Retail Coffee U.S. Retail Coffee net sales decreased 1% to $727.5 million due to lower pricing, but segment profit increased 2% to $207.8 million from favorable volume/mix | Metric | Q3 FY2024 | % Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $727.5M | -1% | | Segment Profit | $207.8M | +2% | | Segment Profit Margin | 28.6% | +80 bps | - Volume/mix increased net sales by 3 percentage points, primarily driven by the Café Bustelo and Dunkin' brands[16] U.S. Retail Frozen Handheld and Spreads U.S. Retail Frozen Handheld and Spreads net sales increased 1% to $436.8 million, with segment profit up 11% to $104.1 million, driven by higher pricing | Metric | Q3 FY2024 | % Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $436.8M | +1% | | Segment Profit | $104.1M | +11% | | Segment Profit Margin | 23.8% | +210 bps | - Excluding the divested Sahale Snacks business, net sales increased by 2%; higher net price realization, including a favorable impact from lapping the Jif recall, was the primary driver[17] U.S. Retail Pet Foods U.S. Retail Pet Foods net sales decreased 39% to $465.2 million due to divestitures, but comparable sales surged 20%, with segment profit flat at $109.5 million | Metric | Q3 FY2024 | % Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $465.2M | -39% | | Segment Profit | $109.5M | 0% | | Segment Profit Margin | 23.5% | +910 bps | - Excluding $372.5 million in noncomparable sales from divested brands, net sales increased by $79.1 million, or 20%, driven by strong performance from Meow Mix cat food and Milk-Bone dog snacks[18] Sweet Baked Snacks The new Sweet Baked Snacks segment, from the Hostess acquisition, contributed $300.3 million in net sales and $68.0 million in segment profit | Metric | Q3 FY2024 | | :--- | :--- | | Net Sales | $300.3M | | Segment Profit | $68.0M | | Segment Profit Margin | 22.6% | - This segment's results are from the acquisition of Hostess Brands on November 7, 2023; prior year comparisons are not provided[1][19] International and Away From Home International and Away From Home net sales increased 4% to $299.4 million, with comparable sales up 9% and segment profit surging 34% to $50.4 million | Metric | Q3 FY2024 | % Change vs. Prior Year | | :--- | :--- | :--- | | Net Sales | $299.4M | +4% | | Segment Profit | $50.4M | +34% | | Segment Profit Margin | 16.8% | +380 bps | - Comparable net sales increased 9%, with volume/mix contributing 5 percentage points of growth, primarily driven by Smucker's Uncrustables frozen sandwiches[20] Financial Statements Unaudited financial statements show a 42% Q3 net income drop to $120.4 million, total assets increased to $20.2 billion, and a $3.9 billion cash outflow for the Hostess acquisition Condensed Consolidated Statements of Income Q3 net sales grew 1% to $2.23 billion, but net income declined 42% to $120.4 million due to special project costs and increased interest expense | Metric (Q3) | FY2024 ($M) | FY2023 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,229.2 | $2,216.3 | 1% | | Gross Profit | $823.1 | $755.8 | 9% | | Operating Income | $297.4 | $317.9 | (6)% | | Net Income | $120.4 | $208.5 | (42)% | Condensed Consolidated Balance Sheets As of January 31, 2024, total assets increased to $20.2 billion, driven by the Hostess acquisition, with long-term debt rising to $8.1 billion | Metric | Jan 31, 2024 ($M) | Apr 30, 2023 ($M) | | :--- | :--- | :--- | | Total Assets | $20,247.2 | $14,991.4 | | Goodwill | $7,667.8 | $5,216.9 | | Long-term Debt | $8,121.1 | $4,314.2 | | Total Shareholders' Equity | $7,560.1 | $7,290.8 | Condensed Consolidated Statements of Cash Flow Q3 net cash from operating activities decreased to $406.5 million, with investing activities showing a $3.57 billion net cash use, primarily for the Hostess acquisition | Cash Flow Activity (Q3) | FY2024 ($M) | FY2023 ($M) | | :--- | :--- | :--- | | Net Cash from Operating | $406.5 | $584.6 | | Net Cash from Investing | ($3,567.5) | ($97.5) | | Net Cash from Financing | ($428.2) | ($410.6) | Non-GAAP Financial Measures & Reconciliations Non-GAAP measures, including adjusted gross profit of $828.3 million and adjusted operating income of $457.5 million, are provided with reconciliations to enhance comparability - The company uses non-GAAP measures such as adjusted operating income and adjusted EPS to evaluate performance internally, excluding items like special project costs, amortization, and gains/losses on divestitures to improve year-over-year comparability[35][36] Reconciliation of Non-GAAP Financial Measures (Q3) | Reconciliation (Q3) | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Gross Profit | $823.1M | $5.2M | $828.3M | | Operating Income | $297.4M | $160.1M | $457.5M | | Net Income | $120.4M | $142.2M | $262.6M | | EPS (Diluted) | $1.13 | $1.35 | $2.48 | FY2024 Guidance Reconciliation | FY2024 Guidance Reconciliation | Low | High | | :--- | :--- | :--- | | Net Income per Share (GAAP) | $6.35 | $6.55 | | Adjustments (Amortization, Special Costs, etc.) | $3.10 | $3.10 | | Adjusted Earnings per Share | $9.45 | $9.65 |