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Hershey trims sales expectations as chocolate demand falls

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The Hershey Company, North America's largest chocolate manufacturer missed sales expectations, and trimmed its outlook for 2016, thanks to weak demand in North America and falling sales in China.

The company's total sales over the three months to April 3 fell by 5.6% year on year, to $1.83bn, $70m below analyst expectations.

Demand from the Easter season, which sees a spike in chocolate demand in North America and Europe, has been stable, but non-seasonal confectionary demand has been weaker than expected.

"Easter performance was solid versus our forecast but non-seasonal candy, mint and gum shipments were below plan," said Hershey chairman and chief executive, John Bilbrey.

Hershey's net profits fell 6.1%, to $229.8m, or $1.06 per share, from $244.7m, or $1.10 per share.

North American demand falls

Hershey's North America net sales were down by 4.3% over the three months to April 3, compared to the same time last year.

This was the first quarterly decline for the company in over a year.

This month data from the confectionary industry showed that North American cocoa grinding, a proxy for consumer demand, fell by 2.2% year on year.

Chinese sales plummet

Hershey's international sales fell by 15.4% over the three months to April 3, compared the same time last year.

Hershey noted lower sales in China, as well as production discontinuations in India and negative exchange rate effects.

Chinese confectionary sales fell by 35% year on year, which Hershey ascribed to "the challenging macroeconomic environment and continued competitive activity".

Growth outlook trimmed

Hershey trimmed its expectations for 2016 organic growth, excluding currency effects, to 2.0%, compared to a previous estimate of 3.0%.

The company estimates full-year 2016 net sales will increase around 1.5%.

Gross margins are expected to fall year-on-year.


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