Sara Lee reports 44% slump in Q2 net earnings

US-based consumer goods company Sara Lee’s fiscal 2012 second quarter net earnings slumped 44% to $469m, compared to $833m in the previous year, due to discontinued operations and lump-sum charges, even though it took higher pricing actions in its core European and American markets.

The company’s net sales from continuing operations for the quarter ending 31 December were up 6.3% to $2.08bn, compared to $1.96bn in the corresponding quarter last year, while adjusted sales rose 5.8% to $2.04bn, from $1.93bn last year.

Earnings from continued operations, which include its domestic meat and international beverage businesses but exclude recently divested operations such as refrigerated dough, bakeries and North American coffee, were $33m, down 63% from $88m a year ago.

Adjusted earnings from continued operations, which exclude items such as impairment charges and gains or losses on the sale of businesses, increased 18% to $158m.

In the coffee and tea segment, sales rose 11% and adjusted net sales increased 11.6%, due to pricing and mix, which was partly offset by a decline in volumes due to the closure of its business in flood-hit Thailand and its exit from its private label business in France.

In the meat segment, selective pricing actions helped increase sales (2.3%) and adjusted sales (0.9%), despite volume declines in core categories.

However, volume and market share increase in the company’s core meat categories was diluted by weak performance in the bakery segment.

Sara Lee chief executive Marcel Smits said the meat business showed a marked improvement in volume and mix trends in the quarter in response to course corrections.

‘We made brisk improvement on the meat categories in the retail and foodservice businesses, while the bakery categories lagged,’ Smits said.

Surging commodity costs pose a major challenge for Sara Lee, especially as they have grown by almost $1bn in the last six quarters, and it expects these costs to grow by another $90m in the next two quarters.

In fiscal 2012, the company expects to generate sales of around $8bn and plans to implement pricing actions to offset rapidly rising costs.

Sara Lee is in the process of splitting apart, separating into an international coffee and tea business and a North American business that includes the Jimmy Dean and Hillshire Farms brands; the company expects the process to be completed by the end of the fiscal year.

…………………….

Image: Surging commodity costs posed a major challenge for Sara Lee, especially as they have grown by almost $1bn in the last six quarters. The company expects the costs to grow by another $90m in the next two quarters. Photo: Sara Lee