CHICAGO, July 30 /PRNewswire-FirstCall/ -- The Wm. Wrigley Jr. Company (NYSE: WWY) today announced a 14 percent gain in second quarter sales versus a year ago to a record $1.38 billion, the Company's highest sales quarter ever. The primary driver of the quarterly sales increase was worldwide shipment growth of 8 percent.
Net earnings for the quarter of $0.61 per diluted share were up 20 percent or $0.10 from the year ago period. On a non-GAAP basis, excluding the negative impact of the supply chain restructuring program, second quarter earnings per share were $0.62, up 17 percent from the same quarter last year.
"Our focused investments in key geographies -- in terms of product innovation and brand support -- are producing excellent results. All major regions contributed to our growth in the quarter, particularly Europe and Asia," said President and Chief Executive Officer Bill Perez. "Our strong first half performance and our ongoing focus on operational efficiency puts us in an excellent position to make the necessary investments in second half product and marketing initiatives to keep our business growing, while still achieving full-year results within our long-term earnings growth objective of 9-11 percent."
Bill Wrigley, Executive Chairman and Chairman of the Board added, "I am especially pleased with our ability to produce excellent near-term results in the face of increased competition while continuing to invest for the long term. The strength of our business extends across our full portfolio of products, with gum and confectionery revenues both rising at double-digit rates through the first six months of the year."
Sales and Gross Margins
Second quarter sales increased by $172 million, or 14 percent, over the same quarter last year. Somewhat more than half of the sales gain was driven by shipment growth across all regions, particularly EMEAI and Asia, including the incremental contribution from the A. Korkunov chocolate acquisition in Russia. Approximately a third of the gain reflects the positive impact of currency, due to translation of international sales into a relatively weaker U.S. dollar, with the balance of the increase due to the positive impact of pricing, mainly in Europe and the U.S.
In EMEAI (principally Europe), sales were $667 million, up $124 million or 23 percent versus a year ago, with just over half of the gain due to volume growth of 12 percent. Of the remaining sales gain of nearly $60 million, a little less than three-quarters is attributable to currency translation and just over one quarter to positive price/mix.
Russia and East Europe continued to lead the growth in the region with double-digit gains, with Orbit, as the #1 brand by far, driving the increase and notable contributions being made by Eclipse(R) and Juicy Fruit(R). Also reporting double-digit sales gains, were Poland and Spain, on the strength of the Orbit(R) brand, and Germany, driven by outstanding growth by Extra(R). In the U.K., although sales in the second quarter moderated from their strong first quarter pace, they were up for the first six months of 2007, recording their best first-half performance in three years. Additionally, throughout the second quarter, the Company saw positive share trends in the U.K., even in advance of the second wave of new product offerings that are currently rolling out into the marketplace.
Sales increased nearly $26 million or 16 percent in Asia to $189 million on volume growth of 15 percent. In China, accelerating sales of Doublemint(R), Extra and TaTa(R) bubble gum helped drive strong double-digit sales growth in the second quarter, building on a similar performance in the first quarter. With its latest surge, Extra became the #2 gum brand in China, now trailing only Doublemint.
North America net sales were $452 million, up three percent on a one percent volume decline, reflecting the impact of recent pricing changes. Orbit, the #1 gum brand in the U.S., continued its strong sales growth, as did Eclipse, especially in its new bottle packaging. Growth by these brands, as well as gains for Lifesavers, were offset by softer performances for Extra and the sugar stick brands in the quarter. Continued strong growth for Altoids(R) chocolate-dipped mints were offset by lower sales for other Altoids formats. Shipments of Wrigley's new brand -- 5(TM) -- that began later in the quarter, provided a modest boost to sales, but the impact of the launch is expected to be more pronounced in the second half of the year. With distribution growing at a record pace, brand advertising for 5 is scheduled to begin in August.
Through the first six months of the year, worldwide sales grew by 15 percent on 10 percent consolidated volume growth, with the remaining third of the gain primarily attributable to the positive impact of currency translation. Year-to-date regional sales growth for EMEAI, Asia and North America were 25 percent, 20 percent and 3 percent, respectively.
Consolidated gross margins for the second quarter were 53.3 percent versus 52.1 percent in the same quarter last year, with lower restructuring charges accounting for about a third of the improvement. Excluding the impact from restructuring, gross margins would have been 53.6 percent this quarter versus 52.8 percent a year ago, reflecting both cost improvements and higher pricing.
Year-to-date consolidated gross margins were 52.5 percent versus 52.0 percent a year ago, with a little more than half of the improvement coming from lower restructuring charges. Excluding the impact from restructuring, year-to-date gross margins would have been 53.0 percent this quarter versus 52.8 percent for the first half of 2006, primarily reflecting slightly improved costs and some pricing.
Operating Profits and Net Earnings
Consolidated operating profits in the period were $263 million, up 19 percent from the same quarter in the prior year. The growth was primarily driven by higher shipment volume, offset by additional investment in infrastructure and brand support, which climbed by 17 percent in the quarter and is expected to continue at a strong pace for the balance of the year. The benefit from translating foreign currencies to the weaker U.S. dollar accounted for somewhat over a third of the gain.
Consolidated net earnings of $170 million were up nearly 21 percent or $29 million from the second quarter of 2006. On a diluted per share basis, earnings were $0.61, up 20 percent or $0.10 versus the prior year, with about $0.04 due to the positive impact of currency translation. On a non-GAAP basis, excluding the impact of restructuring, earnings per share increased 17 percent or $0.09 versus the year-ago quarter.
For the first six months of 2007, operating profits climbed by 20 percent, primarily driven by volume increases, with about a third of the gain due to currency translation. Year-to-date diluted earnings per share of $1.13 are up 24 percent or $0.22 from the first six months of 2006, with about $0.07 due to the positive impact of currency translation. On a non-GAAP basis, excluding the impact of restructuring and the one-time asset sale gain, earnings per share of $1.12 increased 18 percent or $0.17 from the same period a year ago.
The Wm. Wrigley Jr. Company is a recognized leader in confections with a wide range of product offerings including gum, mints, hard and chewy candies, lollipops, and chocolate. The Company reported global sales of nearly $4.7 billion last year and distributes its world-famous brands in more than 180 countries. Three of these brands -- Wrigley's Spearmint(R), Juicy Fruit, and Altoids -- have heritages stretching back more than a century. Other well-loved brands include Doublemint, Life Savers(R), Big Red(R), Boomer(R), Pim Pom(R), Winterfresh, Extra, Freedent(R), Hubba Bubba(R), Orbit, Excel, Creme Savers, Eclipse, Airwaves(R), Solano(R), Sugus(R), P.K.(R), and Cool Air(R).
