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J.M. Smucker Co (SJM-N) the maker of Jif peanut butter and Folgers coffee, reported a lower-than-expected quarterly profit, hurt by higher costs of raw materials like coffee and peanuts, and it cut its full-year profit outlook.
Higher costs for those items and for edible oils, milk and other raw materials pulled down gross margin to 33.8 percent in the second quarter, excluding special project costs, from 39.6 percent in the year-ago period.
"The gross margin was disappointing at 33.8 percent, versus our forecast of 36.5 percent," J.P. Morgan analyst Ken Goldman said in a client note.
Smucker expects a further rise in peanut costs this year. Although green coffee costs have declined from earlier in the year, the company said they will be much higher in the next two quarters compared with year-earlier periods.
However, Smucker said on an analyst call that most other commodity costs appeared to have peaked and actually fell modestly in the past couple of months.
In another encouraging sign for the company, its quarterly revenue rose 18 percent, beating estimates, helped by its acquisition of Rowland Coffee and sales of K-Cups for Green Mountain Coffee Roasters' Keurig brewers.
Analyst Goldman said the sales growth was strong and he believes the results were not as bad as they looked, if the higher tax rate and additional interest expense were excluded.
For the quarter ended Oct. 31, net income fell to $127.2 million US, or $1.12 a share, from $149.7 million, or $1.25 a share, a year ago.
Excluding items, Smucker earned $1.29 a share, compared with the average analysts' average estimate of $1.39 a share, according to Thomson Reuters I/B/E/S.
Sales rose 18 percent to $1.51 billion, beating expectations of $1.49 billion.