Hershey 4th-quarter profit rises on price increases and lower charges; company boosts dividend
Higher prices and lower charges sparked a profit increase for Hershey Co. as the nation’s second-biggest candy maker continued to push its brands to cost-conscious consumers and gain market share.
The company also maintained its 2010 adjusted earnings and sales forecasts while boosting its quarterly dividend. The news sent Hershey’s stock up 19 cents to $37 in premarket trading.
The candy maker’s price hikes contributed to profit increases in every quarter of 2009. While some experts viewed the move as risky, potentially scaring off budget-conscious shoppers, the actions have appeared to have minimal impact as consumers are remaining loyal.
Hershey, based in Hershey, Pa., recently said it would not bid for British rival Cadbury PLC. Cadbury shareholders are expected to vote on Kraft Foods Inc.’s $19.5 billion offer on Tuesday.
The company’s earnings rose 54 percent to $126.8 million, or 55 cents per share, for the period ended Dec. 31.
Removing one-time charges of 8 cents per share, profit was 63 cents per share. This topped the forecast of analysts polled by Thomson Reuters, who predicted earnings of 60 cents per share. These estimates generally take out one-time items.
In the prior-year period Hershey’s charges totaled 23 cents per share.
Sales grew 2 percent to $1.41 billion during the quarter which included Halloween and Christmas — usually a strong period for the maker of Hershey’s chocolate bars and Reese’s peanut butter cups. Analysts expected $1.42 billion in revenue.
“Our fourth quarter results represent a solid finish to a year marked by good progress against our key strategic initiatives despite the backdrop of the macroeconomic issues affecting consumers,” President and CEO David West said in a statement.
For the year, profit improved to $436 million, or $1.90 per share, compared with $311.4 million, or $1.36 per share, a year earlier. Adjusted earnings were $2.17 per share.
Full-year sales increased 3 percent to $5.3 billion from $5.13 billion.
The candymaker reaffirmed that it expects its 2010 adjusted profit to rise 6 percent to 8 percent and sales to climb 3 percent to 5 percent.
Based on 2009 figures, that implies full-year adjusted earnings of about $2.30 to $2.34 per share on sales of about $5.46 billion to $5.56 billion.
Analysts predict a profit of $2.28 per share on revenue of $5.5 billion for the year.
West said the candymaker will launch its Hershey’s Bliss white chocolate during the first half of the year, as well as continue to expand its Pieces product line to include Hershey’s Special Dark, Almond Joy and York.
The company expect to boost its ad spending by 25 to 30 percent to promote brands such as Reese’s, Hershey’s Kisses, Bliss, Twizzlers, Kit Kat and its namesake. New ad campaigns are also planned for Almond Joy, Mounds and York.
Hershey said its earnings, combined with improved working capital and higher operating cash flow, led it to raise its quarterly dividend by 2.25 cents to 32 cents. The dividend will be paid on March 15 to shareholders of record Feb. 25.