Overseas sales boost Sara Lee Q2 profit

By Charlotte Eyre

- Last updated on GMT

Related tags Sara lee Generally accepted accounting principles

US-based food and body care company Sara Lee yesterday posted
profit gains for the second quarter of the fiscal year 2008, with
particularly strong performances from the international beverage
and bakery divisions.

For the period ending 29 December 2007, overall sales for the quarter were up 9.7 per cent to $3,491, while operating income for the period increased to $323m dollars - a massive improvement from the $2m loss reported in 2006.

The company also posted non-adjusted margins of 6.7 per cent for the quarter, after the 0.1 per cent loss one year earlier.

The results demonstrate a turnaround for Sara Lee, which for the past few years has reported strained results across all divisions.

Last November, for example, the company reported a 40 per cent quarterly profit drop.

However, the company's 'transformation strategy', to tighten focus on food, beverage and household and body care, has now started to pay off.

The plan, drawn up in 2005, involved divesting activities that accounted for almost 40 per cent of income, cutting 2,000 jobs.

"During the second quarter, we benefited from our ongoing investment in the company, as sales growth continued across all business segments and we gained share for many of our largest brands," said chairman and chief executive officer Brenda Barnes.

"Our strategic approach to pricing, combined with the impact of procurement and continuous important savings, helped offset significantly increased input costs."

Media advertising and promotion (MAP) spending increased 14 per cent during the quarter, mostly on the back of 40 new product launches, Barnes added.

Divisions outside the US fared particularly well during the quarter, with net sales of international bakery, beverage and body care products increasing by double-figure percentages.

Operating profit rose to $9m compared to $4m one year earlier for international bakery products, and increased to $125m from a $10m loss in the beverage department.

In the North American bakery division, operating income rose to $7m compared to $3m one year earlier in the US.

Sara Lee brand was number one fresh bakery brand in the country with a 7.1 per cent share, the company claims.

All the US divisions experienced single digit growth, except for Foodservice.

The 5.2 per cent decrease in operating profit was attributed to increases in commodities, input costs and dollar inflation.

For the first six months, overall sales increased nine per cent to $6.6bn from $6.1 during the same period in 2006, while the company's operating income was posted at $469, up from $175.

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