J.M. Smucker’s acquisition of Ainsworth Pet Nutrition contributed to the company’s net sales increase of US$153.6 million, or 9 percent, in the first quarter of 2018, which ended July 31. This offset net sales declines in other sectors including some human foods. The company announced their fiscal results on August 21.
"Our strong first quarter earnings reflect the execution of our strategy, aligning our portfolio for growth in pet food, coffee, and snacking," said Mark Smucker, chief executive officer, in a press release. "During the first quarter, we completed the Ainsworth acquisition, which drove much of our year-over-year sales growth, and we are making significant progress toward integrating the business.”
Earlier in 2018, the J. M. Smucker Company signed a definitive agreement to acquire Ainsworth Pet Nutrition, LLC for approximately US$1.7 billion, after an estimated tax benefit of US$200 million. The transaction, announced April 4, closed early in Smucker's fiscal year.
Economic effects of Ainsworth acquisition
The acquisition of Ainsworth contributed US$162.8 million to Smucker’s net sales in the first quarter of 2018. Without the acquisition, net sales decreased by US$9.2 million, or one percent.
In the first quarter of 2018, Smucker’s gross profit increased US$16.1 million, or 2 percent, also primarily driven by the addition of Ainsworth. Net interest expense increased $11.6 million, due to increased debt associated with the Ainsworth acquisition.
Smucker’s United States retail pet food in first quarter of 2018
In the first quarter of 2018, pet food segment net sales increased US$150.5 million reflecting the $162.8 million contribution from Ainsworth. Excluding Ainsworth, U.S. pet food net sales declined US$12.3 million, or 2 percent.
Lower net price realization reduced net sales by 1 percentage point. Lower volume/mix also decreased net sales by 1 percentage point, reflecting declines for the Natural Balance brand and the discontinuation of certain Gravy Train products, partially offset by gains for the Nature's Recipe, Milk Bone and Meow Mix brands.
Pet food segment profit increased US$2.6 million, reflecting the addition of Ainsworth. However, profit contributions from the Ainsworth acquisition reflected the unfavorable impact of the US$10.9 million fair value purchase accounting adjustment. Excluding Ainsworth, segment profit declined as the net impact of lower pricing and higher input and freight costs was only partially offset by reduced marketing expense.
