J. M. Smucker(US:SJM)2021-06-03 20:01Financial Data and Key Metrics Changes - Fiscal 2021 net sales increased by 3%, with a 5% growth when excluding divested businesses and foreign currency exchange [13] - Adjusted earnings per share for fiscal 2021 was $9.12, a 4% increase, exceeding guidance [14] - Free cash flow reached $1.26 billion, above expectations of $1.1 billion [14] - Fourth quarter net sales declined 8% year-over-year, with a 3% decrease when excluding divestitures and foreign exchange [16][28] - Adjusted earnings per share for the fourth quarter was $1.89, reflecting a 26% decline [30] Business Line Data and Key Metrics Changes - Pet food segment net sales decreased 6% excluding divested businesses, but showed growth on a two-year basis [17] - Coffee segment net sales were comparable to the prior year, with a 5% increase on a two-year CAGR basis [32] - Consumer Foods segment net sales decreased 13%, but increased 1% on a comparable basis [33] - Uncrustables brand delivered nearly $130 million in net sales for the quarter, marking its 28th consecutive quarter of growth [20] Market Data and Key Metrics Changes - E-commerce accounted for 12% of U.S. retail net sales for the full year [9] - The total U.S. pet population grew by an estimated high single-digit percentage [17] - Retail sales of coffee brands grew 17% over the last 52 weeks, significantly outpacing category growth [18] Company Strategy and Development Direction - The company is focused on four execution priorities: driving commercial excellence, streamlining cost infrastructure, reshaping the portfolio, and unleashing the organization to win [8][13] - The company is committed to divesting brands inconsistent with long-term strategic focus, optimizing its portfolio towards pet food, coffee, and snacking categories [12] - Increased marketing investment by nearly $40 million or 8% to support brand growth [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued elevated at-home consumption into fiscal 2022, supported by increased pet population and work-from-home trends [22] - The company anticipates a decline in year-over-year earnings per share due to higher costs and the impact of divestitures [24] - Management acknowledged ongoing supply chain challenges and inflation impacting commodity and transportation costs [21] Other Important Information - The company repaid over $860 million of debt during the fiscal year, strengthening its balance sheet [15] - Capital expenditures for the fourth quarter were $108 million, primarily for capacity expansion of Uncrustables [35] - The company plans to maintain a balanced capital deployment model, focusing on reinvestment and returning cash to shareholders [38] Q&A Session Summary Question: Inflation outlook and organic sales growth expectations - Management confirmed expectations for organic sales growth of about 2% at the midpoint of guidance, driven by higher net pricing and continued brand momentum [48][49] Question: Inventory rebuilding expectations - Management indicated that inventory levels are expected to return to normal by the front half of the year, managing supply-demand dynamics effectively [59] Question: SD&A costs and cost savings program - Management clarified that the projected 4% decrease in SD&A costs is driven by ongoing cost management and organizational restructuring [60] Question: Volume and mix expectations - Management expects low single-digit declines in volume and mix, factoring in deceleration in at-home consumption and price elasticities [52][66] Question: Uncrustables sales breakdown - Management confirmed that Uncrustables sales figures include both retail and Away From Home segments, with a 70-30 split [70] Question: Trade spend environment - Management noted that the trade environment is returning to normal, with net pricing expected to be implemented in the second quarter [73]