Hershey 4th-quarter profit rises on price increases and lower charges; company boosts dividend

Hershey 4Q profit climbs; dividend raised

NEW YORK — The Hershey Co. said Tuesday that higher prices helped boost its fourth-quarter profit and it will continue to look for potential acquisitions as its competitors get bigger.

Higher prices and gains in efficiency partially offset higher costs for ingredients, marketing and other areas, Hershey said. The company saw its market share drop slightly for the quarter, in part because of its decision to leave the premium chocolate business.

Despite the strong quarter, a changing candy business could complicate Hershey’s future.

The company, based in Hershey, Pa., does the majority of its business in the slow-growth U.S. market. Hershey leaders said it saw some growth in Canada and Mexico during the quarter.

However, the pending acquisition of Cadbury PLC by Kraft Foods Inc. could squeeze smaller competitors such as Hershey around the globe with its size and broad reach. Hershey has a limited presence in Europe and Asia, where Cadbury is strong.

Cadbury shareholders are expected to vote on Kraft’s $19.5 billion offer on Tuesday.

Hershey, which decided not to bid on Cadbury, said it remains open to considering acquisitions, although it remained mum on specific prospects.

“We will evaluate future acquisition opportunities in the same disciplined manner to ensure appropriate fit within our financial and strategic framework,” Hershey CEO David West told investors.

The company reported Tuesday that its earnings rose 54 percent to $126.8 million, or 55 cents per share, for the period ended Dec. 31.

Removing one-time charges of 8 cents per share, profit was 63 cents per share. This topped the forecast of analysts polled by Thomson Reuters, who predicted earnings of 60 cents per share. These estimates generally take out one-time items.

In the prior-year period Hershey’s charges totaled 23 cents per share.

Sales grew 2 percent to $1.41 billion during the quarter which included Halloween and Christmas — usually a strong period for the maker of Hershey’s chocolate bars and Reese’s peanut butter cups. Analysts expected $1.42 billion in revenue.

However, its results suffered as shipments for Valentine’s Day and Easter shifted out of the quarter.

For the year, profit improved to $436 million, or $1.90 per share, compared with $311.4 million, or $1.36 per share, a year earlier. Adjusted earnings were $2.17 per share.

Full-year sales increased 3 percent to $5.3 billion from $5.13 billion.

The company, the nation’s second-leading candy maker, remained confident and maintained its 2010 adjusted earnings and sales forecasts while boosting its quarterly dividend.

The candymaker expects its 2010 adjusted profit to rise 6 percent to 8 percent and sales to climb 3 percent to 5 percent.

Based on 2009 figures, that implies full-year adjusted earnings of about $2.30 to $2.34 per share on sales of about $5.46 billion to $5.56 billion.

Analysts predict a profit of $2.28 per share on revenue of $5.5 billion for the year.

West said the candymaker will launch a number of new products in the coming year, including its Hershey’s Bliss white chocolate and expanding its Pieces product line.

The company expect to boost its ad spending by 25 to 30 percent to promote brands such as Reese’s, Hershey’s Kisses, Bliss, Twizzlers, Kit Kat and its namesake. New ad campaigns are also planned for Almond Joy, Mounds and York.

Hershey said its earnings, combined with improved working capital and higher operating cash flow, led it to raise its quarterly dividend by 2.25 cents to 32 cents. The dividend will be paid on March 15 to shareholders of record Feb. 25.

Shares of Hershey rose 39 cents, or 1.1 percent, to $37.20.

Sarah Skidmore contributed to this report from Portland, Ore.