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Hershey has posted net sales of $1.97 billion for the first quarter – 4.9% stronger than the same period last year.
Operating profit for the first three months of the year stood at $480.5 million, while net income was a respectable $350 million.
The company’s first quarter was characterised by strong sustainability moves, such as a $500 million sustainability programme and the decision to stop sourcing cocoa beans from areas where deforestation is known to be an issue.
At the end of last year, it also agreed a deal to acquire Amplify Snack Brands.
Hershey president and CEO Michele Buck said: “First-quarter net sales and earnings per share were in line with our expectations as we continue to make progress in our key strategic focus areas.
“We continue to drive growth in our core chocolate brands. The Amplify acquisition is on track and delivering accelerated earnings accretion in 2018. We are transforming the international business model, delivering another quarter of profitable growth And despite heightened cost pressures, we continue to invest in the business and deliver strong earnings growth.”
The 4.9% increase in sales can be attributed to a 3.4 percentage point increase from acquisitions and a 2.4 percentage point volume contribution, less 1.4 percentage point headwinds from net price realisation.
Region by region
The company, whose main part of its business lies in the US and Canada, saw strongest growth in its international segment during the first quarter.
Markets beyond North America grew sales by 8.8% to $220.3 million, with growth driven in part by an 8.1% increase in volume. As expected, Hershey’s business in China continued to sequentially improve, resulting in a constant currency net sales increase of about 1% compared to the first quarter of 2017.
In the US and Canada, sales grew 4.4% to reach $1.75 billion. The Amplify acquisition was a 3.8 point benefit, volume was a 1.8 point benefit, and net price realisation was a 1.4 point headwind.
North America advertising and related consumer marketing increased on core confection brands but was offset by spend optimization and shifts within emerging brands, resulting in an overall decline of 5.7% in the first quarter of 2018 versus the same period last year.
The company’s core chocolate brands continue to perform well and its renewed investment in productive brands such as York, Payday, Almond Joy and Mounds is driving “accelerated velocities” and growth in the US business. The launch of Hershey’s Gold is off to a strong start, it said, and Reese’s Outrageous Bar will launch in May.
Hershey has reaffirmed previous guidance that net sales would increase by between 5% and 7% for the full year, adding that growth now looks to be towards the lower end of that range.
“We have a strong track record of consistently delivering earnings without compromising key business initiatives and investments, and we plan to do so again this year,” Buck said. “We are taking swift action to mitigate the cost headwinds that many in the industry are facing. We believe our focus on in-year margin improvement will benefit the company over the long term and enable us to achieve our goals. We are excited about our brand activations, innovation, and in store merchandising for the rest of the year and believe these activities will drive consumer engagement and growth across our portfolio.”
© FoodBev Media Ltd 2020