The J. M. Smucker Company (SJM) 28 Feb 232023 Q3 Earnings call transcript

Good morning, and welcome to The J. M. Smucker Company's Fiscal 2023 Third Quarter Earnings Question-and-Answer Session. This conference call is being recorded and all participants are in a listen-only mode. Please limit yourself to two questions and re-queue if you have additional questions.

the Relations. over turn Vice Aaron now Investor President, will conference to call Broholm, I ahead, go Please Aaron.

hope chance and at corporate our detailed prepared quarter I remarks, fiscal morning, in jmsmucker.com. XXXX had Good thank release available third earnings you this morning's which question-and-answer and results are review website our to for press joining everyone as a management's session. our on

of this morning's will call the We audio also this an conclusion Q&A replay session. post of at

may we expectations and These and call, During risks statements current statements may forward-looking assumptions and today's reflect our results to make about that on materially actual future performance. due estimates, uncertainties. differ plans and rely

concerning use performance on to evaluate details non-GAAP this you our internally. non-GAAP we measures to press results statements full forward-looking release. in and encourage Additionally, disclosure morning's I read the

Chair Participating the Tucker Chief on Financial of Officer. Officer; Board, President Mark call and are Chief Executive Marshall, this Smucker, and

please the We the up will now first open questions. call queue question. up Operator, for

The Bank question-and-answer is Galbo will Peter [Operator time. your from coming question this from Our at first America. is Instructions] now today Peter, line live. Certainly. of begin session

and Thanks question. morning. taking the Tucker. Mark Good for Hey,

morning. Good

that into into if a of there margin. the fourth being the that's just start quarter. we that as in like And just kind I implied if considerations coffee. think was as also think, of year. what of I as the the in north exit feel we hit I XXXX, base fourth just, by as I maybe to that into XX.X% the XQ. wondering maybe kind But on acceleration just quarter are gross rate to want get is could of any one, using meaningful understand just next The about driven drivers there's kind pretty then of full-year we number

morning. good Peter,

sequential of fiscal the profit you prepared an know, year. remarks yes, our you gross are coffee fourth morning, for in we into quarters, our XX.X% being of us consecutive largely have gross our improvement getting with seen as quarter margin the fourth or sequential And margin, the the quarters four quarter. approximate correct, full its in reaffirmed is the each to due best So that we in this strongest. profit margin And

As it relates puts year, the have is as bit and it I what say just we to relates what calls are next improvement. margin a talked this. fiscal to I about guess would And little

the One is to volume/mix forward. continue we'll see going benefits of

butter the the recall. benefit peanut see lapping of product Jif will We

inflation benefits will a also along from divestiture of addressing manufacturing over see time, environments, and stabilization moderation supply coming along cost overhead. stranded We with of and office with then after also, transformation as and the benefit our a the benefit, chain

follow-up, was Tucker then Meow seems Thanks would for it Got that think more a it. the as supply I maybe of have I that. like you guess, just maybe food, Mark, I if in you're on quarter. go like remarks the of forward. a prepared very in but comments could the what the It new just this maybe Thanks seeing hoping just worst was that, seems Mix cat for And constraints, some particular, not Meow you're you much. chain Mix grown with through in address and

of might to the fragile a it of terms where chain chain, of strong pretty bit we're be. ability years, manage Sure, couple of some through disruptions in Peter. and acknowledging just month is there that – over past our been about by still Yes, quarter or and as varies general, we've fragility these the in some supply talking that consistent supply the

also quarter. that, Mix reiterating able rate disruption and through should temporary. as in again, it temporary growth run acknowledge Meow as working the we on that. through third And continue is the the Mix. and to supply experienced in just fourth as that have work our would work But we well through have which quarter we several we are that some business, Meow We we will be do months, expected with over double-digit to But the next

in Peter, what for shared, Mark Meow up was And Mix of X%. the support quarter

grow. As portfolio you that dry I cat of up now to disruption food disruption perform is continues anticipated said, to digits. portfolio. on Really, of portion to would absent acknowledge we have the right well the wet But want quite double the be manufacturing and side the the the do

Great. Thank you.

Thank you.

from coming is Andrew from question Lazar Next Barclays.

live. now is line Your

morning. Good Thanks. Great.

morning. Good

guess gross points basis of still some, margin start, call I outlook your below pre-pandemic levels. XXX is XX.X% to full-year it,

But of of some margin. this of pricing we gross key some think quantify sort could margin forward. perhaps of on impact maybe is gross recovery And clearly the about buckets you moving mechanical as the

morning. good Andrew,

the only want While do lay as as but margin Not about also this I next portfolio. the I won't quantify the and What within a we the quarter benefits have year we benefit. each We as onward, of the in Jif see lapping that see volume/mix seen for butter year, peanut gross we fiscal is from buckets. sequentially think improvement. we them think product about out you recall

with the stabilization benefit along also then manufacturing transformation support our and cost supply coming restoration. both after We environments, to overhead the will us addressing of gross moderation our divestiture in some margin and the see benefits continue all in help stranded and out that of office inflation chain

line margin full-year least initial bulk looks with double-digit expected like fiscal guided Street to in came SG&A. forecast, organic roughly Street at spend for is marketing for the in results obviously, be low favorability decrease What And drove estimates, came better there, the on the then you in seems versus given and estimates? upside track With to you. EPS from it and than the Thank that. of with XQ, year-over-year it sales your gross

transferring due at the the therefore, quarter. to largely quarter third raise business base some at timing and fourth the note as into was $X.XX to in quarter can you cost third that $X.XX quarter. of midpoint, to came expectations. better our we, in our fourth our favorability Andrew, of about $X.XX momentum shifted And from have the costs guidance And some

Got it. you. Thank

you. Thank

Next Goldman question JPMorgan. is from coming from Ken

now Your is line live.

you. Thank Hi.

You posted cash flow quarter. in free number good the third a

– came curious maybe than cash number XXXX. the were quarter reason that, about You if the that But your the you fundamentals talked in any year. free there's since for And does any but in you for expected. why quarter, – there's it it fourth fourth for imply will any just lowest flow be raised. in better wasn't Smucker how into particular didn't read I adjust was outlook if

if there. curious just there's any I'm in conservatism So

to Jif a annually, $X also have peanut with our but and we to expenditures product to recall, are target year, impact cash butter the Ken, associated below facility. free commitment billion the of capital Uncrustables a flow this we due largely due increased target that

butter spend along estimate at are come that payments haven't with product we peanut due capital of cash in flow, year this largely to core our maintaining some support support recall. million $XXX that as fiscal some about raised the And we So have restructuring through done that of growth. additional in tax Jif we've year this the think you free cash

be about high It on a the the million in it. a that if the math bit fourth bit been Got of question quarter. the I'm then in implies, $XXX just And little little SG&A. to it only history company. It's the correctly, doing build over one-time will that

fourth Again, in So little investment the dig there the further that I rough what that a provided. drive if making or into just to the headwind using just you're is high. SG&A math it will wanted quarter you've that discrete bit that – is up something in

there, and So support you of there in inflation preproduction two, there are that and on filled which implied around is positions; marketing fourth one, and operating are administrative continued are with the there's is Ken, that correct buckets continued across quarter the Uncrustables SG&A. directionally, wage that are: there some expenses the driving for costs then investment year-over-year within really portfolio; increase in our associated in are support

Thank you.

Thank you.

Thank you.

Chris Next today Growe Stifel. from is coming question from

now is line Your live.

morning. Good Hi.

Good morning.

you. a for had question Hi. I just

gross had call a about kind cost Is a that's If a out hold going or coffee taking there gross Tucker, this imbalance So of cost As fourth is or margin in pricing you a improvement, we that stronger divisions two? margin support some support to think that? that's is inflation. sequential division you've where quarter? are helping division there one the

portfolio. stabilization as through or really and as increases. and operate we of Chris, overall morning. the portfolio is continue of inflation momentum margin really, elements And good The see benefits sequential to business we in profit is across coming gross the margin the cost lapping the of that general all of to elements bit the the a under continue most to improve see begin we quarter each enabling it's price to improvement entirety as

sense in note you I And still your your to growth a – it's Thank really of from market about number, just a limiting not good that's that share how for is And showing businesses But limitations Meow Okay. to market thinking it of good XX% for it's your but about I you get was pick that. made was. to still other There like categories. where brands. much a where capacity-driven on you're want gain in And there it's because prepared ability kind big bit categories guess one share. gaining of a remarks down Mix, question. and performance share those showing

the sense Just kind much that's of limiting if market categories give you of can how share. a gaining

And pleased coffee, every every mean well. grew this of continuing Chris. Jif. grew saw Mark. on business very Yes, in look as you We're gain growth. to I with And in quarter. share with every Uncrustables brand at good XX% course, growth, progress in brand It's essentially grew our we if then pet,

tend growing. of we around maintaining to two-thirds and So target

confident back that expect we'll And Meow performance of supply largely that, by and we feel we really is so to chain we as in time, you where challenges some the be. to with the manage the referenced number that we're Mix, over get through do – driven pleased

Okay. much Thank time. you very for your

Thank you.

you. Thank

from coming is from question Moskow Next Robert Suisse. Credit

now live. is line Your

Hi.

flow, Tucker, small will pretty thinking you as a your cash costs butter ones. flow positive Jif about then cash coffee then fiscal or free XXXX is have working mean, are XXXX, few capital think cat And I above peanut I all expecting snacks are But on it volume we snacks is can secondly, in assume dog have and is obvious. falling. free a that volume. a in follow-up. because segments of positive possible And of normal quick general your food, When Just in that you're coffee. benefit I

portfolio of process may with we here share trend do week, at bit pet, that last our a we have volume flow free or early free more opportunity the and brand. year. as our brand. or earnings as But of of cash June. to about tailwinds call CAGNY ambition. within Uncrustables $X in ongoing we other or billion morning. We good the outlined we'll accelerated for we And next fourth Uncrustables think elevated portfolio target you target as capital expect continue on with about quarter portfolio for across have know, fiscal in have elements that because cash planning and to think associated capacity And we within flow, the Rob, investment a We're the low to through our as momentum some the innings we mix coffee expenditures

do from but of on repo? maybe the get this answered intend before, $XXX And to you it. million spend you've divestiture, all that you'll in the dog share food Got cash

the to million divested replace share. per earnings $XXX the anticipate We using

we you. Okay. follow-up. All thank Well, but, can Vague, right.

you. Thank

Next Bank. Steve Deutsche from coming question from is Powers

live. now is line Your

Thanks and morning. good

morning. Good

but fourth just wrong, Correct you XX% year-over-year. go me Maybe last XQ if that back quarter I'm EPS be XQ. had versus up I expected to the quarter to said to you the about think

to a X of I think shifted The out called you that. that $X.XX XX. kind equates about from implies XQ of to guidance the now XQ range X% to of

the I'm full what range So $X.XX because the drivers acknowledging shift? those in put the struggling – just – I'm to of and wider understand numbers in context now can you XQ

Yes.

the disruption, line in pet bit both primarily that brand, Mix the to so things model associated bottom a chain your might portfolio little I is Meow in that topline supply short think and from you leave one the standpoint. of consider have with the you the

that? and what unrelated improve expect is the the far to in cited expect little forward how going brands, on so Maybe segment. other improve, just hear a little commentary because wanted the you a you that you it more you've greater more elasticity And on bit premium question just around but suggests that to commentary to seen just bit Okay. where do Dunkin'

Sure.

is strategy, just segments. validates our bit all, clearly Obviously, quarter. portfolio" macro is benefited participating shifting, all I of it little Folgers that where "full a there think comment, in first this the Steve, a of

of it fact across the spectrum the playing broadly that category. we're So of value the these validates in all segments

a So that's good thing. definitely

The that's more quarters, the two bit is a grew. growth is the thing the brand other last good that modest although still it's in –

last we some pricing, so points have And – news. just relative great And quarter we is referenced was there relative I correct. which that to work think just price

accelerate. And the quarters, see on growth so next continue to couple of over would to expect we the Dunkin'

That's Okay, Appreciate it. you. thank confirming.

you. Thank

you. Thank

is Next Morgan from today coming from Kaufman Stanley. question Pamela

Your line is now live.

Hi. morning. Good

morning. Good

you going And marketing in question quarter I question just versus a have the are forward? back to have – appropriate? your you was of current levels stepped for do spend? think the Where plans your are up that still come spend, a more of to sales X.X% to so between X% – marketing to year. up or X% targets Just on time, last what Over are planning XX% which sales you X%

Mark. It's Pam. Sure,

So that brands. in There and because a third a advertising brand. our have we brand was supporting on of up continued which the Nutrish, across all actually new growth invest our turned quarter has to broadly supporting on portfolio of the we been the and bit step

So been positive. that's

percentage that And we over our our as X-ish fluctuated on say, broadly of percent you inflation recall we've in year. anticipate of we've a would a may invest about bit And also entire but a to our continued because target, continuing this marketing across of sales the to net time, sales, that brands, percent as above talked has portfolio. marketing

how coffee over thinking about Thanks. prices? you you green next have significantly? moderated coffee lowering costs And quarters would several then segment, it consider when in the And on coffee pricing are given the

a not by highlight that hedge costs plan. to you as coffee you prices financial we did start when I quarters. spot in that experiencing coffee our just Yes. guess buy dip significantly can we of I achieve some We saying But our and the sure see know, couple make would over have moderated coffee past were position we as volatility.

have markets particularly rebounded, continued and we've and the there that coffee the elevated so And some weeks and costs. is to in inflation last several more see coffee

using extent adjust so. will our that's physical as pricing or position the our levers So to whether always, dictate we list other that would

So we price quarters. will you effectively any but and prudent really pass responsible that, I more give can't and be than changes along coming over the

Thank you. Great.

you. Thank

question Ross is UBS. Next coming Cody from from

live. now is line Your

Hey. question. Good for our morning. Thank you taking

Good morning.

of A couple here. questions

First one on pet.

for this your Some year will place any Or another to the pet And plans of businesses. of on business in key price asset sold the pricing then February is effective you'll actions similarly, their you pet post? take wait Do competitors that plan food fiscal well? you round have retain? in you to until as do announced remaining pricing

a of our the for pricing taken well. portfolio, have forward-looking benefit and as actually we comment Cody, that is

And in sorry, of repeat pricing the could part have I already we activities you our So it, I'm think I pet. your done second question, that? missed effectively

in you Yes. pricing pet of I food any that follow-up. your I a business you'll have was just or retain? place pet And the for if have then business asking plans remaining

that. Yes, I think already answered I

just surrounding Yes. last question, And your capital then allocation. just

capital portion differently? meaningful adding assets. of acquisitions non-core performing your forward? from then would have over you is decade the will you Thank over and have And past higher you. anything going shedding assets some over believe past similarly, the As done decade, turned allocation the that a look you learned you've we business, there enhance What

a that most portfolio is the time, we're in about recent plus, helped there's shift our our we've very that we're very strategy. been time. really Over reshape. dictates in Cody, for that consumer been question. the over increase over and needed and years, that divestitures And service with to years a And And Yes, acquisitive several which clear in customers, we've industry the of shift last proud company, executing of has portfolio in stature couple the of the predominantly very decades been although all also thanks our on. and trajectory our some

we've is reinforce right strategy that so And that brands. our focused right, decisions made on the and late the really we're of

acquisitions, want story. going responsible a position we've for or and existing role growth responsible that And portfolio our in that to prudent enhance about to acquisitions provide But go play price. possibly acquisitions that acquisitions and that at are growing as a talked about in will new we meaningful important we category and a our still sure make think we very an we as future we're

you. Thank

from Our Dickerson next is question coming Rob from Jefferies.

Your line live. now is

much. bit Or kind proxy like of about put up of first to look a QX, next we of as think that quarters a to through that line But return XXXX last say, so, seasonality. it by let's like state. – would weighted. the looks you're to like maybe decent next be questions for think six back to say, Tucker, the just two giving ramping as Thanks kind line, as we used SD&A a steady back it normally, XXXX you I to pre-pandemic for in kind of and kind normal Thanks. when over This reasons. little look weighted? that's Tucker, what more kind be half lower Great. back year. Mark. I in the Obviously, your Might I we year, in see half goes let's a so half is assuming so of assume, more to or not for somewhat then state? sorry, at of back give, it it maybe half first driven obvious in you're steady think year, at was guidance realize we rate the run that more about I'm

that Rob. fiscal a level level to of fiscal SD&A it fair morning. out year I are Good this as year. the about little planning. modeling just noted. would there's forward Obviously, assumptions bit fiscal think sort the as you more to through year nuances envision expenses it's I throughout the for think initial you've But

question. in Perfect. quarters CapEx imply for though, flow, the right. step-up half. cash a material also relative what so which from implied first All of we this step-up was simple even far what could Thanks. saw the QX about asked three kind through Ken would year, to QX, And then be QX in free a

want is right? the that could So make should end And that, if quickly year. finishing implied to maybe there's fiscal be much. by the of kind on done why then so comment like sure projects Thanks a step-up I there. you're certain you that's That of almost just just And step-up, such it.

of still its the the million see Yes. and that quarter, we $XXX fourth continues spend to McCalla, at capital a the year, the We facility the for spend Uncrustables have predominance building. fiscal will and full Alabama outlook the for meaningful in for support of be and

Super. Thank you.

you. Thank

you. Thank

Thank you.

Howard Next question from today coming from Bernstein. Alexia is

is now live. line Your

everyone. morning, Good

morning. Good

questions. Two quick

somewhat around side? this chain quarter? the You have Do Jif share wait share wondering challenges. expect are trends lap next do we sharply you those going being trends to we talked quarter on just the about by market supply those share recall, until trends bounce Or the disrupted to back

them reverse We to would Alexia. time, over expect

a going largely the prepared I take supply comment we months us. in chain, to think about a through there session, this manage cat is talked dry managing earlier as few to fruit that's remarks through. was particular we've and And spreads, behind we're think which the in Q&A

mean, trends. expect that we I to a then follow-up, improvement and butter I peanut rebuild that the next it Thank the very to working the at Can hard distribution get all share is rate know run over you've And meaningful been Or I'm kind the we're just you. at, working market Great. been you've just as back. sure of But few moment? this distribution. months?

you. thank Yes. Alexia,

have the to of return with We been really shelves. Jif pleased

of CAGNY north of is are back on back that share. of last Jif the all SKUs we've fact, our XX% shelf In commented and at week dollar share

over with we really next continue quarter to or the see So so. improvement execution the pleased there. would And

Thank Great. pass you. on. I'll it

you. Thank

you. Thank

coming from is from BNP Paribas. Gumport question Max Next

for but the food Is the in Hey. referring divesting from Nutrish by category. benefiting that shifts intrigued are in question. realize primarily Or that was reference to I the dog longer-term your to comment shifts Thanks in you're there premiumization you're there? business, I trend? the other Thanks. the category about

trying the business on and it's lot and it XX a then Nutrish portfolio, with sure to some been the a most last now. the to packaging narrow for sure over Mark. We've journey spent And of more making of revitalizing We that months making the brand that some were XX effort advertising is in that, healthy. of Max, recently productive, terms is new launching sale. assortment we preparing as optimize is

progress pleased we've dog with the in the made XLives hands sure And good well will making food as post. leave so there as ultimately we brand that brands really very that other to as brands that and transition and those

very Great. it leave there. much. I'll Thanks

Thank you.

to We the reached like end back Thank comments. floor further for management to question-and-answer I'd you. over closing the our or session. of any turn

I Kevin. consistently week and it really many all, really just, to like joining that appreciate over our that at – this employees. and deliver all, a is momentum you that here, your of the and able last past have you, of us tribute great Thank time with been and morning CAGNY we first several to was the really say to of all quarter of seeing outstanding would pleased the course,

thank always for to their employees our to and and take work all to day. you just company a so Thank great hope And have hard I you. a dedication moment of wanting the

conclude today's webcast. teleconference That you. and Thank does

your you disconnect at your We participation this You wonderful time, may have and thank day. for a today. line