Hershey Co reported a higher-than-expected quarterly profit on Thursday, as increased advertising helped drive the U.S. chocolate maker's sales even as a joint venture in India struggled.
The maker of Hershey's Kisses, Kit Kat bars and Reese's peanut butter cups stood by its 2010 forecast for adjusted earnings per share, but reduced its forecast for net earnings due in part to an impairment charge related to the Godrej Hershey Ltd joint venture in India.
The company also tightened its full-year sales forecast.
Hershey said its net earnings were $46.7 million, or 20 cents per share in the second quarter, down from $71.3 million, or 31 cents per share, a year earlier.
The latest quarter's results included an 11 cent-per-share charge related to a supply chain modernization program and a 20 cent-per-share goodwill impairment charge related to the India venture, which Hershey said has grown slower than initially was expected.
The company cited slower realization of development plans, changes in commodity costs and economic challenges that have delayed the expansion of distribution and the implementation of new product pricing.
Excluding the charges, Hershey's second-quarter profit was 51 cents per share, which topped analysts' average estimate of 46 cents per share, according to Thomson Reuters I/B/E/S.
Net sales rose 5.3 percent to $1.23 billion, helped by a benefit from foreign currency exchange rates and some price increases.
In the second quarter, the company's advertising expenses increased about 50 percent, partly due to the launch of new products including Hershey's Special Dark, Almond Joy and York Pieces.
The company said it was planning additional increases in advertising for the full year and expects advertising expenses to increase about 45 percent to 50 percent in 2010. It had earlier forecast an increase of 35 percent to 40 percent.
Hershey said it expects adjusted earnings per share of $2.47 to $2.52 per share for 2010, though its reported earnings should range from $2.04 to $2.12. Its net sales are expected to rise about 7 percent.
Last month, Hershey forecast 2010 reported earnings of $2.31 to $2.38 on net sales expected to increase 6 percent to 7 percent.
(Reporting by Martinne Geller, editing by Maureen Bavdek)