Smucker's
Revenues
Up 29 Consecutive Years
By Charles Allmon, editor
Growth Stock Outlook
J.M.
Smucker (NYSE SJM $27.00) reports
revenues up 29 consecutive years. Founded over a century ago
in Ohio, Smucker's is a well-known food producer. Smucker's jams,
jellies, topping, peanut butter, jelly sandwiches, syrups, juices,
and other products are sold in grocery stores and outlets where
food is found. In 2001, fruit spreads contributed 38% of sales.
Here's what
Tim and Richard Smucker had to say about the year just passed:
"It was a year in which we made investments to support future
growth and faced several challenges particularly from adverse
exchange rates in our major international markets and from escalating
fuel and energy costs. Fourth-quarter results were strong, and
we look forward to continuing that momentum into the new fiscal
year.
"The Consumer
area posted good results across product lines and achieved record
share-of-market in the fruit spreads category. Sugar-free fruit
spreads and natural peanut butters were the strongest contributors
to sales growth. Increased fruit spreads sales through the club
stores channel also contributed.
"The Foodservice
area of the domestic segment experienced another year of growth,
thanks mainly to increased sales and distribution of our Uncrustables
product.
"Sales
in our industrial business were up 1 percent overall with the
Brazil and Scotland operations included, but domestic sales alone
were down approximately 7 percent from last year.
"International
segment sales grew 3 percent as a result of the new industrial
businesses in Brazil and Scotland and a strong performance by
our Canadian subsidiary. Sales in the rest of the world were
off from the prior year, especially in Australia where competitive
pressures and an adverse exchange rate posed challenges. In fact,
international sales would have been 10 percent greater overall
if exchange rates had remained what they were last year.
"Time and
again, good companies have proven that investing in the future
and maintaining long-term focus even when it causes some short-term
pain provide a solid foundation for growth. Our reply to slower-growth
markets has been to expand our brand name, launch new products,
and stretch into new categories. This continues to be our strategy.
"We continue
to focus on Uncrustables, our line of crustless,
thaw-and-serve peanut butter and jelly sandwiches. Within the
school foodservice market, sales of Uncrustables have
increased substantially over last year, yet to date we are in
fewer than 20 percent of school districts nationally. Reaching
a later percentage of children with a branded food item, served
as a meal or nutritious snack, is a most exciting prospect for
our Company. The Uncrustables line was also successful
this year in traditional foodservice outlets, especially in the
recreation category where initial placements have included Walt
Disney World and several major league baseball parks.
"In fiscal 2001, our new systems helped us improve control of our inventory and working capital needs. As a result, we decreased our working capital in 2001 (not including cash) by more than $25 million, or 19 percent. Our new systems and processes have also enabled us to communicate more effectively with our customers and brokers, reduce the average number of days it takes to collect on our receivables, increase our inventory turns, and improve our order accuracy and on-time deliveries.
"We completed the installation of a new roaster and are expanding the warehouse at our New Bethlehem peanut butter plant; we made equipment and facilities additions at our Fargo and Watsonville plants to support increased Uncrustables sales; and we added a new portion control line in Orrville.
"For the fourth consecutive year, we are honored to report that our Company has earned a place on Fortune magazine's list of `The 100 Best Companies to Work For.' We are very proud that more than 40 percent of our employees have been with us 10 years or more."
On 4-30-01 total assets were $470,469,000, current assets $229,066,000, current liabilities $67,103,000, cash and equivalents $51,125,000, long-term debt $135,000,000, deferred income taxes $4,981,000, shares outstanding 24,359,000, shareholder equity $247,111,000 ($10.14 per share), return on shareholder equity 12.8%, positive cash flow, LIFO inventories. [Company address: Strawberry Lane, Orrville, Ohio 44667. (330) 682-3000].
Allmon's Comment: First I remind investors that Smucker's is a great company to work for, again ranking in Fortune's top 100 best companies. There's still a family feeling about Smucker's, a disappearing attribute in America today. I would venture a guess that everyone reading this report has eaten a Smucker's product, perhaps for breakfast today, or lunch. As a fan of Smucker's products, I can tell you from firsthand experience that those sugar-free jams do not come any better.
Smucker's ended fiscal 2001 (April) with considerable momentum running. Therefore, I believe that Smucker's will post record revenues and profits for 2002. Revenues of $675 million or higher may be within reach, throwing off earnings in the $1.40 - $1.47 range, even in this sluggish economy.
During the year, SJM took on a heavy load of debt, more than we generally prefer to see. Let's hope that they work it down quickly because nothing causes a good company to unravel more quickly than a mountain of debt. Did Smucker's swallow Wall Street's bait and buy the leverage baloney story? I don't think so, because momentum now is running strong. This is one of America's classiest companies, with a wonderful family flavor.
Editor's Note: Charles Allmon is publisher of Growth Stock Outlook, now in its 37th year of continuous publication, P.O. Box 15381, Chevy Chase, MD 20825, 1 year, 24 issues, $235.
