The J.M. Smucker Company (NYSE:SJM) – Rising Prices Change Dynamics

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(Best Syndication News) A declining dollar and higher commodity prices have made things more difficult for companies like The J.M. Smucker Company (NYSE:SJM). So far the food products company has been able to push higher prices onto retailers, but inflation has put pressure on earnings.

Earnings in the fourth quarter 2011 fell 21 percent, primarily from a divestiture last year and higher tax rate. Higher prices help boost sales 11 percent beating analyst expectations.

Analysts had expected the earnings per share to match the last quarter of 99 cents. “GAAP earnings per share were $0.82 this quarter and $1.01 in the fourth quarter of last year, including restructuring and merger and integration costs, which I will refer to as special project costs,” Mark Smucker, President, U.S. Retail Coffee, said in a conference call today.

“Excluding these charges, earnings per share were $1 this quarter and $1.07 in last year's fourth quarter.”

The company has had to deal with higher commodity prices. Tim Smucker, Chairman of the Board and Co-Chief Executive Officer, said the company has “successfully navigated” the year’s higher green coffee costs. Coffee volume was down slightly.

Although coffee prices have advanced over the last 100 days, the commodity is lower over the last 30 days (see survey #2 data below). The high cost over the last 100 days on the Coffee, Sugar and Cocoa Exchange (CSCE) was $305.55 per 100 pounds. The low was $232.00.

The company said that innovation contributed to the coffee sales growth, which was up 14 percent for the year.

Sugar prices are lower over the last 100 days, but the 30 day trend is higher.

“Higher raw material costs were primarily driven by green coffee and soybean oil,” Mark Smucker said. “Price increases taken earlier in the year offset higher costs, but did not result in gross margin gain. Unrealized mark-to-market adjustments on commodity instruments were not material for the quarter.”

So far consumers have not seen the bulk of the price increases.

The share price was up 1.74 (2.28%) to $78.13 during regular trading today. In after hours the price fell 0.22 (-0.29%) to 77.91.

By: Dan Wilson

Wednesday Survey #1 One-Day One-Day 1 Week 30-Day 100-Day
6/8/2011 Commodity Platform $ Change % Change % Change % Change % Change
2,927.00 Cocoa CSCE 32.00 1.11% -0.88% -5.21% -3.88%
264.75 Coffee CSCE 2.25 0.86% 3.72% -10.47% 12.85%
689.5 Corn X 100 CBOT 13.50 2.00% 1.55% 2.03% 6.28%
181.85 Orange juice NYCE -2.15 -1.17% -0.79% 9.88% 5.97%
1,399.00 Soybeans X 100 CBOT 5.00 0.36% 0.79% 0.70% -1.65%
24.86 Sugar CSCE 0.51 2.09% 10.59% 7.16% -19.29%
748.5 Wheat X 100 CBOT 15.50 2.11% -1.58% -11.63% -3.36%
795.90 Agricultural Agricultural 8.61 1.09% -0.14% -4.18% -1.58%
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