Good end to the year for US confectionery groups
announced 2002 results hit by the cost of discussing the deal.
Two of the largest confectionery groups in the US, Wrigley and Hershey, have both reported good results for the final quarter and full year 2002.
Bill Wrigley, president of the eponymous gum producer, said the final quarter of the year had been marked by record shipments, sales and earnings, with earnings per share up 20 per cent on the previous year and sales ahead 16 per cent. For the year as a whole, EPS were 11 per cent higher, while turnover increased 14 per cent.
"Our excellent results in 2002 reflect hard work by our entire global team in support of our core brands and a significant number of new product initiatives. Our ability to deliver strong sales and profits, while simultaneously making substantial additional investments in brand support, technology infrastructure and strategic initiatives, is testimony to the Wrigley team's excellence in execution against our long-term strategic plan," he said in a statement.
For the year as a whole, Wrigley's sales reached $2.7 billion, reflecting a 13 per cent gain in the Americas and a 16 per cent increase in international sales. Exchange rates bolstered the international sales, but even at constant rates, the increase would have been an encouraging 12 per cent, Wrigley said. In volume terms, sales were up 8 per cent.
In the final quarter, Wrigley posted worldwide sales of $739 million on volume increases of 9 per cent. Quarterly sales increased by 19 per cent in international markets and by 12 per cent in the Americas, due primarily to strong volumes and a favourable product mix, the company said.
Operating profits for the year rose by 14 per cent, including the $10 million in costs related to the ultimately fruitless exploration of a merger with Hershey. Operating profits in the Americas increased by 8 per cent for the year, while international operating profits were up 12 per cent (or 9 per cent on constant exchange rates). Operating profits also benefited from reduced marketing and other expenses for the Wrigley Healthcare Division compared to the prior year. Net profits were $402 million, up 11 per cent
Meanwhile, Hershey appears to have shrugged off the uncertainty over its future which dogged the firm throughout much of the latter part of 2002 (as well as Wrigley, it received takeover offers from both Cadbury Schweppes and Nestlé), managing to end the final quarter in the black after posting losses in the previous year.
Sales for the fourth quarter were slightly ahead of the previous year at $1.16 billion, while net profits were $130 million, a major improvement on losses of nearly $45 million in 2001. For the full year 2002, sales were $4.12 billion, down slightly from the $4.14 billion posted in the previous year, but net profits were well ahead of 2001 at $403 million.
Hershey also incurred expenses related to its aborted sale plans, racking up $17.2 million before bowing to pressure from both workers and local government and deciding not to sell the business.
Richard H. Lenny, chairman, president and CEO of Hershey said that while the slight drop in sales for the year was disappointing, he was pleased that increasing sales were coming from high-revenue products, which augured well for the future. "Hershey's fourth quarter results were in line with expectations, achieving a balance of improved market place performance and profitability," he said. "Despite a sluggish retail environment, Hershey's consumer takeaway increased, resulting in a 0.4 point gain in market share. Equally as important, supply chain productivity and tight expense control continued to deliver solid gains during the quarter."
He continued: "Although net sales were flat in the US business, retail takeaway in all food, drug, mass, and convenience channels increased by 3 per cent. This performance reflects our disciplined focus on building Hershey's core brands (+8 per cent), expanding our leadership position in the key chocolate category (+5 per cent), and significantly improving performance in the high growth convenience store channel (+9 per cent). Our ability to deliver solid performance, despite numerous challenges, positions us well as we continue to implement Hershey's long-term growth initiatives," Lenny concluded.
