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Hershey Q4 Profit Rises, Meets View; Sees Higher Results In FY12 - Update

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2/1/2012 8:30 AM ET

Chocolate and confectionery products maker Hershey Co. (HSY: Quote) reported Wednesday a higher profit for its fourth quarter on higher volumes and price increases, despite lower margin. Adjusted earnings per share came in line with view, while sales topped estimates. Looking ahead, the company projects higher earnings and sales for fiscal 2012.

fourth-quarter reported net income grew to $142.13 million or $0.62 per share from last year's $135.51 million or $0.59 per share.

The latest quarter results included net pre-tax charges of $27.7 million or $0.08 per share primarily related to the Project Next Century program, while prior year's charges were $7.9 million or $0.02 per share.

Adjusted earnings, which excluded these charges, rose 14.8 percent to $159.64 million or $0.70 per share from $140.38 million or $0.61 per share a year earlier.

On average, 13 analysts polled by Thomson Reuters expected earnings per share of $0.70 for the quarter. Analysts' estimates typically exclude one-time items.

Consolidated net sales increased 5.7 percent to $1.57 billion from with $1.48 billion for the 2010 fourth quarter, while analysts estimated revenue of $1.56 billion.

For the quarter, gross margin declined 150 basis points to 40.3 percent and income before interest and income taxes or EBIT margin fell 80 basis points to 14.6 percent. Adjusted gross margin also declined 50 basis points, while adjusted EBIT margin grew from last year.

The company said it achieved productivity and cost savings goals in the quarter, but these initiatives and the net price realization were more than offset by higher input and supply chain costs.

President and Chief Executive Officer John Bilbrey stated, "Hershey's fourth quarter represents a solid finish to 2011 and we expect to carry our momentum into 2012. Net price realization, primarily in the U.S., was a 5.9 point benefit. As expected, volume improved from last quarter, slightly greater than our expectations, increasing 0.4 points."

For the full year 2011, adjusted net income grew 10.6 percent to $648.73 million or $2.82 per share and sales rose 7.2 percent to $6.08 billion.

Looking ahead for 2012, the company anticipates earnings per share of $2.79 - $2.89 and adjusted earnings per share of $3.08 - $3.14. Analysts project earnings per share of $3.13 for 2012.

Full-year adjusted earnings per share are expected to increase 9-11 percent and net sales are expected to increase 5 percent - 7 percent.

Bilbrey further said, "We have good visibility into our full-year cost structure and, despite higher input costs in 2012, we expect adjusted gross margin to increase about 75 basis points driven by productivity and cost savings as well as net price realization."

In a separate statement, Hershey said its Board of Directors announced quarterly dividends of $0.38 on the Common Stock and $0.344 on the Class B Common Stock. The dividends represents a growth of 10 percent and are payable March 15 to stockholders of record February 24.

In pre-market activity, HSY shares are currently trading at $60.87, down $0.21 or 0.34 percent.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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