JM Smucker booked a third-quarter loss after recording goodwill impairment charges of more than $1bn.
The US manufacturer posted a net loss of $662.3m for the three months to 31 January, compared to a profit of $120.4m a year earlier.
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The third-quarter loss meant JM Smucker also ran up a net loss of $501.8m for the first nine months of its financial year. In the corresponding period of the group’s 2023/24 financial year, it generated a net income of $498.9m.
The Jif peanut butter brand owner booked “non-cash impairment charges” of $794.3m and $208.2m related to the goodwill of its sweet baked snacks reporting unit and the Hostess brand trademark.
The charges meant the company made operating losses of $594m for the third quarter and $74.8m for the nine months. The comparable figures for the corresponding periods in the previous year were operating profits of $297.4m and $899.8m.
JM Smucker said its “adjusted” operating income increased 1% in the third quarter to $463.8m.
The third-quarter accounts also included a $50.2m net pre-tax loss on disposals. JM Smucker recorded a $42.6m pre-tax loss on a group of sweet baked snacks brands classified as “held for sale”. Last month, the company struck a deal to sell its Cloverhill and Big Texas brands to fellow US group JTM Foods. It expects the deal to be finalised by the end of April.
The $50.2m net pre-tax loss also included a $7.6m “adjustment” to the Voortman assets sold. In October, JM Smucker announced the sale of its Voortman cookies brand to US-based snacks maker Second Nature Brands.
Sweet snacks sales turn sour
Third-quarter net sales fell 2% to $2.19bn. Underlying net sales, which excluded M&A, disposals and exchange rates, dipped 1%.
JM Smucker reported a five percentage-point decrease from “volume/mix”, which it said was “primarily driven” by decreases for coffee, dog snacks and lower contract manufacturing sales linked to pet-food brands it had sold.
The company also cited a three percentage-point increase from price increases, highlighting rises it had secured on coffee.
It saw sales from its Uncrustables sandwiches grow during the quarter.
However, the sales JM Smucker generated from its sweet-baked snacks division fell 7%. Excluding the impact of last year’s Hostess acquisition, sales decreased 8%.
The company said sales of snack cakes and private-label products fell year on year.
Divisional profits dropped 19% amid “lower net price realisation” and the absence of the higher profits from the Voortman business sold off.
Alongside the results, JM Smucker said it had promoted Judd Freitag to lead its sweet baked snacks and US retail divisions.
The “supply-chain disruptions” within the company’s pet-food business, which had hit sales of Milk-Bone and Meow Mix, are passed, it said.
“We’re back to full production and anticipate returning to full distribution in the fourth quarter,” chair, president and CEO Mark Smucker told analysts.
Nine-month group net sales increased 10% to $6.58bn.
“Our third-quarter performance reflects the continued execution of our strategy and ability to deliver positive results in a dynamic operating and consumer environment,” Mr Smucker added.
“Net sales for the quarter would have been above our expectations, however, we experienced certain supply chain disruptions that negatively impacted results. Disciplined cost management and execution enabled us to deliver adjusted earnings per share that exceeded our expectations.”
For the full fiscal year, JM Smucker is forecasting its net sales will rise 7.25%, compared to its previous estimate of growth of 7.5-8.5%.
The company has also tweaked its projection for its annual adjusted earnings per share, which it now sees hitting $9.85 to $10.15. It had earlier forecast $9.70 to $10.10.
