The Hershey Company (HSY) has reported a 48.72 percent plunge in profit for the quarter ended Dec. 31, 2016. The company has earned $116.85 million, or $0.55 a share in the quarter, compared with $227.89 million, or $1.04 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $249.66 million, or $1.17 a share compared with $237.04 million or $1.08 a share, a year ago.
Revenue during the quarter grew 3.20 percent to $1,970.24 million from $1,909.22 million in the previous year period. Gross margin for the quarter contracted 830 basis points over the previous year period to 37.67 percent. Total expenses were 88.35 percent of quarterly revenues, up from 80.81 percent for the same period last year. That has resulted in a contraction of 755 basis points in operating margin to 11.65 percent.
Operating income for the quarter was $229.49 million, compared with $366.44 million in the previous year period.
However, the adjusted operating income for the quarter stood at $378.41 million compared to $380.38 million in the prior year period. At the same time, adjusted operating margin contracted 72 basis points in the quarter to 19.21 percent from 19.92 percent in the last year period.
"I'm pleased with our fourth-quarter results, particularly operating profit that was greater than our expectations, and marketplace performance, which sequentially improved throughout the year, resulting in an increase in our candy, mint and gum (CMG) market share," said John P. Bilbrey, chairman, president and chief executive officer, The Hershey Company. "Additionally, the implementation of efficiency initiatives related to the review of our cost structure resulted in lower selling, marketing and administrative (SM&A) expenses versus our forecast. These initiatives, which we will discuss more broadly at our investor update on March 1, 2017, enabled us to deliver additional operating income growth earlier than planned resulting in 2016 earnings per share diluted ahead of our forecast. Our U.S. marketplace performance was in line with our expectations across all retail channels driven by seasonal results. Our brands responded positively to our Halloween and Holiday investments and we gained 0.3 market share points in each season. Cash flow generation, a hallmark of the company, remains strong as we generated operating cash flow of nearly $1 billion in 2016. Combined with our solid balance sheet this enabled us to return about $920 million to stockholders via dividends and share repurchases."
For financial year 2017, The Hershey Company projects revenue to grow in the range of 2 percent to 3 percent. It forecasts diluted earnings per share to be in the range of $4.54 to $4.65. It forecasts diluted earnings per share to be in the range of $4.72 to $4.81 on adjusted basis for the same period.
Working capital remains negative
Working capital of The Hershey Company was negative $92.66 million on Dec. 31, 2016 compared with negative $369.31 million on Dec. 31, 2015. Current ratio was at 0.95 as on Dec. 31, 2016, up from 0.83 on Dec. 31, 2015.
Cash conversion cycle (CCC) has decreased to 21 days for the quarter from 26 days for the last year period. Days sales outstanding were almost stable at 13 days for the quarter, when compared with the last year period.
Days inventory outstanding has decreased to 27 days for the quarter compared with 32 days for the previous year period. At the same time, days payable outstanding went down to 19 days for the quarter from 20 for the same period last year.
Debt moves up
The Hershey Company has witnessed an increase in total debt over the last one year. It stood at $2,980.17 million as on Dec. 31, 2016, up 23.12 percent or $559.64 million from $2,420.53 million on Dec. 31, 2015. Total debt was 53.95 percent of total assets as on Dec. 31, 2016, compared with 45.29 percent on Dec. 31, 2015. Debt to equity ratio was at 3.60 as on Dec. 31, 2016, up from 2.31 as on Dec. 31, 2015. Interest coverage ratio deteriorated to 9.80 for the quarter from 17.68 for the same period last year.
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