June 5, 2014 / 2:30 PM / 4 years ago

UPDATE 2-Smucker profit forecast tops estimates despite rising coffee costs

(Recasts, adds analysts’ views, updates shares)

By Devika Krishna Kumar

June 5 (Reuters) - J.M. Smucker Co forecast full-year profit above estimates as sales increased in its domestic consumer food business - which includes peanut butter and cooking oils - and despite rising coffee costs.

The company’s coffee business, which includes the Folgers and Dunkin Donuts brands, is its largest by revenue.

Smucker, the biggest U.S. roaster, was forced to cut prices of packaged coffee earlier this year when arabica coffee prices plunged.

But arabica prices have jumped nearly 90 percent in three months, allowing Smucker to raise list prices for the first time since 2011 on most of its U.S. packaged coffee.

The company, which also makes Jif peanut butter and Crisco oils, forecast full-year adjusted earnings of $5.95-$6.05 per share. It expects sales to rise about 5 percent, implying revenue of about $5.9 billion.

Analysts on average were expecting earnings of $5.98 on revenue of $5.77 billion, according to Thomson Reuters I/B/E/S.

Profit in the company’s domestic consumer food business rose 6 percent to $95.7 million in the fourth quarter ended April 30, the company said on Thursday.

Smucker said it expects its peanut-butter business to be the key contributor to earnings in its consumer foods business in 2015 as it enters into new contracts at lower prices.

The company failed to benefit from a drop in peanut prices last year as it had signed long-term peanut purchase contracts unlike rivals such as Hormel Foods Corp, the owner of Skippy peanut butter.

Smucker has been struggling to boost sales of its peanut butter and fruit spreads due to rising competition and consumers shifting away from artificially sweetened fruit spreads.

Ohio-based Smucker said it expects its K-cups - coffee pods used in Keurig Green Mountain Inc’s single coffee brewers - to achieve modest volume growth in 2015.

The company’s net income fell 9 percent to $118.5 million, or $1.16 per share, in the fourth quarter.

Excluding items, profit was $1.21 per share.

Net sales fell 8 percent to $1.23 billion, hurt by a 12 percent drop in sales in its U.S. retail coffee business as it cut prices to pass on lower green coffee costs realized during the year.

Analysts on average had expected Smucker to earn $1.16 per share on sales of $1.24 billion.

Smucker shares were up 1.5 percent at $104.44 in afternoon trading on the New York Stock Exchange on Thursday. (Reporting by Siddharth Cavale and Devika Krishna Kumar in Bangalore; Editing by Joyjeet Das)

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