The J. M. Smucker Company (SJM) Q4 2019 earnings summary

Executive summary

• FY19 net sales rose 7% to $7.838B, driven mainly by the Ainsworth acquisition and innovation; sales excluding acquisitions, divestitures, and FX were comparable YoY.

• Adjusted EPS increased 4% to $8.29; reported diluted EPS was $4.52, reflecting lower net income and nonrecurring items.

• Portfolio priorities centered on Pet Food & Snacks, Coffee, and Consumer Snacking; growth brands generated $2B in annual sales and were projected to grow at a high-single-digit rate over five years.

Financial highlights

• Net income was $514.4M, down 62%; operating income fell 11% to $928.6M, while adjusted operating income rose 4% to $1.492B.

• Gross profit increased 3% to $2.916B; gross margin was 37.2%, versus 38.5% in FY18. Adjusted gross margin was 37.9%, versus 38.1%.

• Q4 net sales were $1.902B and net income was $71.5M; diluted EPS was $0.63.

• Marketing spend reached 7% of net sales, up 100+ bps YoY; new products introduced in the prior three years generated $420M in sales.

Outlook and guidance

• Long-term objectives: annual net sales growth of 2–3%, adjusted operating income growth of 5%, and adjusted diluted EPS growth averaging 8%.

• FY20 effective tax rate expected at 24.5–25.0%; annual Ainsworth synergies of ~$55M expected by end-2021, with most achieved by end-2020.

• FY20 cash requirements included $800M of principal payments, $390M of dividends, $310M of capital expenditures, and $205M of interest payments.

• Longmont Uncrustables production was expected to begin in H2 calendar 2019; the first construction phase included investment of up to $250M.