RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

High-priced coffee stocks to haunt Smucker a bit longer yet

Twitter Linkedin

JM Smucker, having revealed a dent to profits from inventories of high-priced coffee bought last year, said that it had more of these stocks to work through yet, leaving margins facing some pressure into the autumn.

Shares in the group, the top US roaster, which owns the Folger's and Keurig coffee brands, fell by nearly 4% on Thursday after it unveiled that efforts to pass on in higher prices elevated coffee costs had prompted a sharp drop in sales volumes in the February-to-April quarter.

While the Smucker retail coffee division will see "both net sales and segment profit growth" for the new financial year, which started last month, this will take time to kick in.

"We recognise in the first [May-to-July] quarter we're going to be challenged because we still have some high-cost coffee," Smucker's chief executive Richard Smucker told investors.

"So our margins in the first quarter aren't going to be where we'd like them to be."

Cheap beans feed through

The extent of the margin pressure raised some comment from JP Morgan analyst Ken Goldman, who flagged previous guidance from Smucker of roughly four months in changes market prices affecting the group's margins.

"Coffee has been very cheap since pretty early this year. It's been over four months," Mr Goldman said.

However, Mr Smucker looked to the second half of the group's financial year, which ends in April 2016, for some more forgiving margins, as the impact of cheaper green beans feeds through.

"Our raw material costs are coming back in line," he said.

"Most of the gain is going to come in the last half of the [financial] year.

"It took us about 18 months to get where we are. It will probably take us12 months to get back."

Price "misstep"

He added that "our pricing on the retail shelf is getting much better," in reference to a price hike that hurt sales last year, and that the group acknowledged as a "misstep".

Vince Byrd, the Smucker chief executive, said that "we expect to recognise lower green coffee costs as we proceed through the year, which we have begun passing through to our customers and consumers in the form of lower promoted price points on the Folgers mainstream offerings".

By Agrimoney.com

Twitter Linkedin
Related Stories

Evening markets: South American double whammy brings ags back down to earth

Ags lose early gains, undermined by a tumble in Brazil’s real, and falling rain in Argentina. Still, wheat futures remain in positive territory

Evening markets: Ags gain, as funds begin to get that year-end festive mood

Ag prices recover, helped by the likes of more positive comment on US export competitiveness, and some more negative talk on Argentine rains

Rabobank 'no more bearish' on coffee prices, despite raising supply hopes

The bank upgrades world coffee supply estimates for this season and next made only two weeks ago. Will output deficit return in 2019-20?

Evening markets: ags overlook crumbs of comfort in Wasde to set fresh historic low

The Bcom ag commodity subindex ends at a fresh record low, as US export fears overtake upbeat interpretations of corn, cotton estimate revisions
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069