February 1, 2013
Hillshire Brands' Q2 earnings rise due to easing commodity costs
Press Release
Aided by a pullback in commodity costs, Hillshire Brands exceeded its second-quarter earnings' expectations as it continues to invest in brand building and capabilities.
The company threw caution to the commodity input costs which is expected to become more challenging as the year progresses.
“Our business is continuing to perform well and I am very pleased with the progress we’re making," said Sean Connolly, president and chief executive officer, "The Hillshire Brands Company, “Our investment in MAP is strengthening our core brands, our innovation pipeline is becoming more robust, and we remain highly focused on managing costs. We also clearly benefited from favorable input costs, an area that we expect to become more challenging in calendar year 2013. Based on our strong first half results, and taking into account our outlook for the rest of the year, we are raising full year Earning Per Share (EPS) guidance.â€
The company said it is raising its full-year earnings outlook based on its results in the first half of the fiscal year. Net sales in the retailing sector increased 2.2% over the prior year quarter behind higher volumes and favourable mix. Strong performers in the quarter included Jimmy Dean sandwiches and bowls, Aidells sausage and Hillshire Farm lunch meat, among seasonal meats. Hillshire Brands will roll out new packaging and product quality improvements for Hillshire Farm lunch meat brand in third quarter.
The adjusted operating income for retail and reported operating income increased 23.2% and 31.5% respectively. Lower input costs and higher sales were significant contributor to the increased profit.
The company's foodservice/other business units reported solid results, with increased net sales of 2.8% behind volume gains in both commodity meats and foodservice meats. In foodservice bakery, volumes declined but showed signs of stabilisation.
The adjusted operating income and reported operating income for foodservice/other business units increased 8.5% and decreased 4.1% respectively. The increase in adjusted operating segment income resulted from higher volume and lower commodity input costs. These gains were partially offset by negative mix from high commodity meat sales and higher bakery production costs.
For Hillshire Brands' second quarter continuing operations, adjusted diluted EPS increased US$0.14 to US$0.62; reported diluted EPS increased US$0.38 to US$0.47. Adjusted operating income increased US$26 million to US$127 million; reported operating income increased US$76 to US$99 million.
The company's adjusted and reported net sales also increased 2.5% and 0.7%, respectively, to US$1.06 billion.
Hillshire Brands said it now expects to earn US$1.60-1.70 per share, excluding special items, for the full year, on slightly positive sales growth.
