The J. M. Smucker Company (SJM) Q4 2017 earnings summary

Executive summary

• FY2017 was a transition year amid persistent top-line softness; adjusted EPS was $7.72, down 1% YoY, and aligned with projections.

• Investment priorities included innovation, digital and e-commerce capabilities, manufacturing capacity, and cost savings to support long-term growth.

• Uncrustables and Café Bustelo delivered double-digit sales growth; incremental Big Heart synergies reached $122 million for the year.

Financial highlights

• Net sales fell 5% to $7,392.3 million; excluding the canned milk divestiture and FX, sales declined 3% on lower pricing and unfavorable volume/mix.

• GAAP operating income decreased 10% to $1,031.5 million; net income fell 14% to $592.3 million, and diluted EPS declined to $5.10 from $5.76.

• Adjusted operating income decreased 1% to $1,481.8 million; adjusted income was $895.9 million and adjusted diluted EPS was $7.72, down 1%.

• Operating cash flow was $1,059.0 million and free cash flow was $866.6 million, down from $1,461.0 million and $1,259.6 million, respectively, in FY2016.

Outlook and guidance

• Long-term objectives target average annual net sales growth of 3% and adjusted EPS growth of 8%; organic growth and acquisitions are expected to contribute to sales.

• E-commerce target: 5% of net sales by FY2020; Natural Balance online sales grew roughly 60% in FY2017.

• Big Heart synergies target $200 million annually by FY2018; $159 million had been realized through FY2017. A separate cost-management program targets $200 million in annual savings by FY2020.

• The Uncrustables Longmont plant is planned in phases, with up to $200 million for Phase 1 and a further $140 million dependent on demand; production was expected to begin in calendar 2019.

• Wesson acquisition, valued at $285 million and expected to be debt-funded primarily, was projected to add $230 million in annual sales and $20 million in annual synergies within two years of closing, subject to approvals.