Hershey Posts Record First-Quarter Profits

The newly renamed Hershey Co. (HSY), the nation's largest candy maker, on Thursday said first-quarter profits rose 10.3 percent on the strength of several new products and last year's purchase of a Mexican candy maker and a Hawaiian macadamia nut (search) processor.

The results also prompted Hershey (search) to boost its sales expectations for the year.

Hershey earned $118.2 million, or 47 cents a share, for the first three months of 2005, compared with a gain of $107.1 million, or 41 cents a share, in the same period a year earlier. That figure beat the consensus forecast of 46 cents per share by analysts surveyed by Thomson First Call (search).

Sales rose to $1.13 billion, an increase of 11 percent from $1.01 billion a year ago.

Based on the results, the company said it is expecting sales growth to exceed its stated expectation of 3 to 4 percent and earnings per share growth to be at the upper range of its 9 to 11 percent expectation in 2005.

"By leveraging Hershey's iconic brands and capitalizing on our value chain capabilities, we'll strengthen our confectionery leadership while gaining critical mass in relevant snack categories," said Richard H. Lenny, chairman, president and chief executive officer.

Morningstar analyst Mark Hugh Sam noted that the company picked up another 1.6 percent market share in chocolate — a category it already ruled with 43 percent of retail sales — and had shown success with new entries in the $40 billion retail market for salty snacks and cookies.

"The market wants to know why they're not predicting even higher profits because it appears they're lowballing us," Hugh Sam said.

In particular, Hershey cited the introduction of Hershey's Take 5, a new line of cookies, Ice Breakers gum variations, and limited editions of its better-known chocolate brands for sales growth of 8 percent.

The acquisitions of Hawaii's largest macadamia nut processor, Mauna Loa Macadamia Nut Corp., and the Mexico-based maker of spicy candies, Grupo Lorena, brought sales growth of 3 percent, Hershey said.

The results came two days after the company changed its 37-year-old Hershey Foods Corp. name and dropped a logo of a stylized blue "H" in favor of one that resembles the wrapper on its Hershey's chocolate bar and a wrapped Hershey's Kiss.

In search of a new image, the company has undertaken a wider corporate makeover that also involves big-city retail stores and snack food lines, such as health bars and cookies.

Hershey has concentrated on producing new varieties of its well-known brands, such as caramel-filled Kisses, that typically bring high profit margins. The company plans this year to roll out peanut butter-filled Kisses, crunchy Smartzone "nutrition" bars and variations of its dark chocolate bars.

The Hershey, Pa.-based company also makes the Reese's, Almond Joy, Mounds, KitKat and Mr. Goodbar, and employs 14,000 worldwide.

Shares of the company closed up 92 cents, or 1.5 percent, to $60.82 in Thursday trading on the New York Stock Exchange. In after hours trading, the shares lost 11 cents to $60.71.