Sara Lee Boosts Full Year Forecasts After Strong Q2
Net sales were unchanged in the second quarter as favorable foreign currency exchange rates were offset by slightly lower corporate unit volumes, lower prices and the impact of divestitures. Cash from operations continued to improve, primarily due to higher operating income.
5 Feb 2010 --- Sara Lee Corp. has reported strong operating income growth for the second quarter of fiscal 2010, driven by significant improvement in operating segment income across the company, particularly in the North American Retail and International Beverage business segments, and lower corporate expenses. Net income also rose sharply, driven by higher income from continuing and discontinued operations, partially due to one-time tax benefits and lower charges for significant items. Net sales were unchanged in the second quarter as favorable foreign currency exchange rates were offset by slightly lower corporate unit volumes, lower prices and the impact of divestitures. Cash from operations continued to improve, primarily due to higher operating income.
“We’re pleased to report a strong second quarter, which was even better than our first quarter, and was highlighted by significant profit growth,” said Sara Lee Corp. chairman and chief executive officer Brenda C. Barnes. “On an adjusted basis, every segment of our continuing business, along with Household and Body Care, delivered income growth in the quarter. During this period we recalibrated pricing, which helped us deliver improved volume trends. Based on the strong first half performance, we have raised guidance and feel very confident in our full year outlook. We also are making significant investments across our business designed to drive growth this year and beyond. We believe that we will have a strong 2010 and are confident that in 2011 we can deliver meaningful additional profit improvement.” Barnes added, “We made further progress toward completing the divestiture of our Household and Body Care businesses, thus far receiving binding offers for body care and air care for a combined 1.595 billion euros. We are also making progress toward selling the remainder of the business.”
Net sales for the second quarter of fiscal 2010 were $2.9 billion, unchanged versus the year-ago period as favorable foreign currency exchange rates were offset by the impact of divestitures, slightly lower unit volumes and lower selling prices. The company’s adjusted net sales decreased 2.7%. Total Sara Lee unit volumes were 1.0% lower in the second quarter, but increased 0.7% excluding the impact of planned exits from commodity and kosher meats in the North American Retail segment. On a comparable basis, in the first quarter of fiscal 2010, volumes decreased 2.4%. Unit volume trends generally showed improvement in the second quarter driven by innovative new products, successful trade spending and strategic pricing initiatives.
Sara Lee reported second quarter operating income of $282 million, compared to an operating loss of $(4) million in the prior-year period. Adjusted operating income increased to $319 million in the second quarter, up 75.8%. The improvement in adjusted operating income included a $103 million increase in total adjusted operating segment income for all continuing business segments, $27 million of favorable mark-to-market variances on commodity derivatives and lower corporate costs.
Net sales for the international household and body care businesses, which are being reported as discontinued operations, were $565 million in the second quarter of fiscal 2010, compared to $484 million in the prior-year period, a 16.8% increase. This was primarily due to strength in most of the core categories and favorable foreign currency exchange rates. Adjusted net sales increased 5.4%.
Operating segment income in the second quarter was $63 million, an increase of $19 million compared to the year-ago period. The increase was driven by higher net sales, Project Accelerate and continuous
improvement savings, lower commodity costs and favorable foreign currency exchange rates, which were partially offset by higher media advertising and promotion (MAP) spending. Adjusted operating segment income was up 44.9% in the second quarter.
Net income was $66 million in the second quarter versus $23 million in the year-ago period, primarily due to improved business performance, the recognition of $27 million of net tax benefits and $8 million in benefit from the cessation of depreciation and amortization in compliance with U.S. GAAP rules, which were partially offset by $19 million in charges for various significant items.
