Hershey reports increase in Q4 net earnings

Helped by price increases and continuing cost savings, US-based chocolate manufacturer Hershey has reported a fourth quarter net income rise of 4.9% to $142m and a growth in net sales by 5.7% to $1.56bn year-on-year.

The company also raised its 2012 earnings and sales growth targets, citing cost savings, productivity measures and expected increases in sales volume.

For the full financial year ending 31 December 2011, net sales increased by 7.2% to $6.08bn, compared to $5.67bn in 2010, while net income increased 23% to $628m from $509m in the previous year.

‘In 2011, Hershey continued to make good progress against its business model and strategy of investing in core brands and capabilities in the US and key international markets,’ said Hershey president and CEO JP Bilbrey.

‘Our success is reflected in our solid net sales growth and market share gains, giving us flexibility to make broad-based investments while delivering on our earnings objective,’ Bilbrey added.

For both the quarterly and full year periods, the candy, mint and gum (CMG) category in the US continued to grow beyond the historical category growth rate of 3-4%, with US CMG retail takeaway for the quarter and full financial year showing an increase of 6.5% and 7.8% respectively.

Hershey said its sales last year also saw an increase due to the successful launches of new products such as Reese’s Minis and Hershey’s Drops, and the company intends to extend some of those lines this year.

After raising the prices of its candy products by almost 10%, Hershey plans to make a similar attempt this year to offset higher costs.

However, the candy maker intends to soften the shocks for customers with a series of seasonal specific advertising, coupons and programming to help them adjust to the new price point.

In January, Hershey completed the acquisition of Canadian confectionery company Brookside Foods and it expects Brookside to generate net sales of approximately $90m in fiscal 2012.

In 2012, the company plans to focus on building brands in both the US and key international markets. In the second half of the year it plans to open its Asia research and development centre in Shanghai, enabling the company to quickly develop and test new products for international markets.

Excluding the Brookside acquisition, the company has forecast volumes to be slightly up in fiscal 2012 and is expecting a 5-7% growth in net sales.