HERSHEY, Pa., Aug. 15 /PRNewswire-FirstCall/ -- The Hershey Company
(NYSE: HSY) today announced an increase in wholesale prices across its U.S.,
Puerto Rico and export chocolate and sugar confectionery lines.
A weighted average 11 percent increase on the Company's instant
consumable, multi-pack and packaged candy lines is effective today. These
changes approximate a 10 percent increase over Hershey's entire domestic
product line and will help offset a portion of the significant increases in
the Company's input costs, including raw materials, packaging materials, fuel,
utilities, and transportation.
"Commodity costs have been volatile over the last several years and
continue to remain at levels that are well above historical averages," said
David J. West, President and Chief Executive Officer, The Hershey Company.
"Market prices for ingredients such as cocoa, corn sweeteners, sugar and
peanuts are up 20 to 45 percent since the beginning of the year. As such, in
2009 we expect our commodity cost increase to be more than double the 2008
increase. Execution of commodity hedging strategies to firm up our 2009
commodity cost profile will add approximately $10-12 million, or roughly $0.03
per share, to our initial estimate of about a $100 million increase in 2008
raw material costs. This additional increase, as well as the timing and
slightly higher trade promotion expense related to the price increase, will be
reflected in our third quarter results. We remain committed to the higher
levels of brand support, consumer investment, retail coverage and
merchandising in both 2008 and 2009 that we previously communicated. We
anticipate 2008 earnings per share-diluted from operations within the $1.85 to
$1.90 range we previously projected. Given current economic and market
conditions, it appears that full-year 2008 earnings per share-diluted will be
toward the lower end of this range.
"For the full-year 2008, we continue to expect net sales growth of 3-4
percent. Consumers are likely to see higher every day and promotional retail
prices as we implement the price increase and, as a result, we expect volume
in the fourth quarter and next year to be lower than previously estimated. In
2009, we expect net sales growth of 2-3 percent versus our previous projection
of 3-5 percent. We will focus on productivity and other initiatives to offset
a portion of the higher input costs and increased consumer investment.
Therefore, we continue to expect that earnings per share-diluted from
operations in 2009 will increase, however, at a rate below our long-term
objective of 6-8 percent growth.
"Hershey remains committed to providing the world's best chocolate and
confectionery products made with the highest-quality ingredients. Our
consumers and customers understand this and realize that Hershey products will
continue to represent outstanding quality and excellent value," West
concluded.
Note: In this release, Hershey has provided forward-looking income
measures excluding business realignment and impairment charges that would be
included in comparable measures calculated and presented in accordance with
generally accepted accounting principles ("GAAP"). These non-GAAP financial
measures are used in evaluating results of operations for internal purposes.
These non-GAAP measures are not intended to replace the presentation of
financial results in accordance with GAAP. Rather, the Company believes
exclusion of such items provides additional information to investors to
facilitate the comparison of past and present operations. The business
realignment and impairment charges relate to the Global Supply Chain
Transformation program announced in February 2007 and the business realignment
in Brazil announced in December 2007. The Global Supply Chain Transformation
program is expected to result in pre-tax charges and non-recurring project
implementation costs of $550 million - $575 million. Total charges include
project management and start-up costs of approximately $60 million. In 2008,
the Company expects to record total GAAP charges of about $135 million - $145
million, or $0.39 - $0.42 per share-diluted. Below is a reconciliation of GAAP
and non-GAAP items to the Company's earnings per share-diluted outlook:
2008
Expected EPS-Diluted $1.43 - $1.51
Total Business Realignment
and Impairment Charges $0.39 - $0.42
Expected EPS-Diluted from Operations* $1.85 - $1.90
*From operations, excluding business realignment and impairment charges.
Safe Harbor Statement
This release contains statements which are forward-looking. These
statements are made based upon current expectations which are subject to risk
and uncertainty. Actual results may differ materially from those contained in
the forward-looking statements. Factors which could cause results to differ
materially include, but are not limited to: our ability to implement and
generate expected ongoing annual savings from the initiatives to transform our
supply chain and advance our value-enhancing strategy; changes in raw material
and other costs and selling price increases; our ability to execute our supply
chain transformation within the anticipated timeframe in accordance with our
cost estimates; the impact of future developments related to the product
recall and temporary plant closure in Canada in the fourth quarter of 2006,
including our ability to recover costs we incurred for the recall and plant
closure from responsible third-parties; the impact of future developments
related to the investigation by government regulators of alleged pricing
practices by members of the confectionery industry, including risks of
subsequent litigation or further government action; pension cost factors, such
as actuarial assumptions, market performance and employee retirement
decisions; changes in our stock price, and resulting impacts on our expenses
for incentive compensation, stock options and certain employee benefits;
market demand for our new and existing products; changes in our business
environment, including actions of competitors and changes in consumer
preferences; changes in governmental laws and regulations, including taxes;
risks and uncertainties related to our international operations; and such
other matters as discussed in our Annual Report on Form 10-K for 2007. All
information in this press release is as of August 15, 2008. The Company
undertakes no duty to update any forward-looking statement to conform the
statement to actual results or changes in the Company's expectations.
SOURCE The Hershey Company
/CONTACT: FINANCIAL, Mark Pogharian, +1-717-534-7556, or MEDIA, Kirk
Saville, +1-717-534-7641, both of The Hershey Company/
/Web site: http://www.hersheys.com /
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