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JM Smucker raises 2018 guidance thanks to US tax reforms; 5,000 workers set for sweet bonus

Last updated: 09:25 16 Feb 2018 EST, First published: 04:25 16 Feb 2018 EST

Smucker's fruit jelly
Smucker’s third quarter numbers also got a lift from President Trump’s new tax laws

US fruit jelly maker, The J.M. Smucker Company (NYSE:SJM) has upped its full-year forecasts in the wake of the tax reforms recently brought in by President Trump.

The Ohio-based group now expects to post adjusted EPS (earnings per share) of between US$8.20 and US$8.30 in 2018, up from its previous guidance of between US$7.75 and US$7.90.

READ: J.M. Smucker sees first quarter earnings fall, missing market forecasts, and lowers full year guidance

Free cash flow is also set to be higher than initially forecast at US$825mln (US$775mln previously).

“The increase in earnings and cash flow guidance primarily reflects the benefit of a lower effective tax rate as a result of US income tax reform, partially offset by anticipated freight cost increases and a charge related to obsolete inventory in the third quarter,” said Friday’s statement.

Smucker added that its effective tax rate should fall to 28% this year, followed by another drop to 23% in 2019.

Bonus for employees

Employees also stand to gain from the tax changes, with the company ploughing an extra US$20mln into its pension plan, while almost 5,000 workers will get a one-off bonus of almost US$1,000.

As for its third quarter performance, adjusted earnings per share jumped 25% to US$2.50, while net sales rose 1% to US$1.9bn, reflecting growth across most of the company’s key brands and categories.

“We had a strong third quarter, with sales growth for key brands in every business and strong earnings per share growth fuelled by the benefits of US income tax reform and ongoing cost discipline,” said chief executive Mark Smucker.

“These results reflect our commitment to delivering top and bottom line growth and supporting our portfolio of iconic and emerging brands. In addition, the benefits of income tax reform provide incremental fuel to invest in our growth initiatives and support our employees and communities as well as opportunities to increase cash returned to shareholders.”

Smucker shares edged 1.5% higher to US$124.50 in premarket trading on Friday.

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