CHICAGO (Reuters) - U.S. chewing gum maker Wm Wrigley Jr Co, which is being acquired by Mars Inc, posted better-than-expected profit, boosted by price increases, improved margins and a weak U.S. dollar that helped increase sales.
The Chicago-based company said on Monday that net income for the second quarter rose to $193.8 million, or 70 cents a share, compared with $169.8 million, or 61 cents a share, a year earlier.
Excluding one-time charges related to the proposed merger with Mars, Wrigley said profit was 74 cents per share. Analysts on average forecast earnings of 68 cents per share, according to Reuters Estimates.
Second-quarter revenue rose 14 percent to $1.57 billion from $1.38 billion a year ago, with the currency benefit accounting for more than half of the increase, Wrigley said.
The dollar’s weakness against many foreign currencies helped Wrigley’s performance when its international sales were converted to U.S. currency for inclusion on the company’s income statement.
“I think overall from a sales perspective it was more or less in line with what I expected. You’re seeing continued strength in Eastern Europe and Asia,” said Morningstar analyst Mitch Corwin, adding that Wrigley’s gross-margin improvement was the biggest surprise to him.
Consolidated gross margins for the quarter ended June 30, were 54.9 percent, up from 53.2 percent a year ago, with Wrigley attributing the improvement mainly to price increases and improved efficiencies.
Wrigley, the maker of Big Red and Eclipse chewing gum and Altoids mints, is being bought by M&M candy maker Mars in a $23 billion deal to create the world’s largest confectionary company.
The deal, which was announced in April and is worth $80 a share, could close as early as the fall and was given the go- ahead from the European Commission on Monday.
Wrigley has faced increasing pressure from the gum business of Britain’s Cadbury Schweppes Plc, whose brands include Dentyne and Trident. Its sales in the U.S. have struggled, with growth mainly being driven by emerging markets such as China.
North American quarterly sales rose 5 percent to $474.5 million from $452.1 million, helped by price increases, although volume declined about 5 percent.
“Overall, the gum business in the U.S. is still a work in progress,” Corwin said, noting the company’s efforts to repackage its brands and add more fruit flavors.
Sales in Europe rose about 17 percent to $782.6 million from $671.5 million, with nearly three-fourths of the increase attributed to favorable currency gains against the weak U.S. dollar.
Sales in Wrigley’s Asia/Pacific division rose about 25 percent to $290.2 million from $231.6 million, with China’s sales growth driving performance. Half of the division’s gain was due to volume growth and the other half was due to favorable currency translation, Wrigley said.
Wrigley shares were up 16 cents to $79.15 in afternoon trading on the New York Stock Exchange.
Reporting by Erin Zureick, editing by Dave Zimmerman and Andre Grenon