Commodity costs: snack maker Snyder's-Lance issues profit warning

By Jane Byrne

- Last updated on GMT

Related tags: Food and agriculture organization

US snack group, Snyder's-Lance, has issued a profit warning, citing the impact of increasing commodity costs on the margins of its private label products.

The North Carolina based snack group, which was formed as part of a merger between Pretzel maker Snyder’s and sandwich cracker maker Lance in July 2010 said a delay in securing price increases to offset commodity costs had forced it to adjust its earnings guidance for 2011.

Adjusted earnings

Snyder-Lance said that it now expects adjusted earnings in a range of 75 cents to 90 cents per share, down from a prior forecast for earnings between 85 cents and $1 per share.

And the snack maker said it anticipates an approximately $15m charge in the second quarter due to the changeover of its direct store delivery system to an independent operator model.

The group, which is second largest salty snack company in the US after Frito-Lay, manufactures, markets and distributes both in the US and internationally, and has a private label and third party manufacturing division.

It is due to release its full second quarter results next month. Ahead of those, it reports that despite the adjusted earnings guidance, branded product revenues have been solid, showing year over year increases of about 3.5 per cent.

Furthermore, the snack maker stated that the overall integration of both companies is on track, with significant progress made to date; the merger is expected to be completed by mid-year 2012.

Volatility in commodity markets

High food prices and volatility in commodity markets are here to stay, according to a report last month from the Organization for Economic Cooperation and Development (OECD) and the Food and Agriculture Organisation (FAO).

The joint report said commodity prices should fall from the highs of early 2011, but in real terms are projected to average up to 20 per cent higher for cereals and up to 30 per cent for meats, over the 2011-20 period compared to the last decade.

In its ‘Agricultural Outlook 2011-2020', the OECD-FAO reports that the agricultural commodity market has entered its fifth successive year of high volatility, but added that a good harvest in the coming months should push commodity prices down from the extreme levels seen earlier this year.

“In the current market context, price volatility could remain a feature of agricultural markets, and coherent policies are required to both reduce volatility and limit its negative impacts,” said Jacques Diouf, director-general of the FAO.

Related topics: Manufacturers

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