uploads/2016/06/synergies.jpg

What Synergies Is J.M. Smucker Targeting for the Future?

By

Updated

Synergies realized in 2016

The J.M. Smucker Company (SJM) realized over $35 million in synergies in fiscal 2016. This marked the company’s successful achievement of its March 1 integration milestone for its pet food business.

Article continues below advertisement

Synergy target for 2017

The company expects to realize $100 million in incremental synergies in fiscal 2017, which would make its total ~$135 million for 2017. The company is optimistic in achieving its original target of $200 million in annual synergies by the end of fiscal 2018.

A goal of $50 million worth of incremental annual cost savings over the next few years is also in place. SJM expects $60 million in synergies from direct materials, $40 million from its operations and supply chain, $30 million from marketing and selling, and $70 million from corporate administration.

To obtain this target and further optimize its manufacturing footprint over the next 18 months, the company has a few projects underway. These include closing a coffee facility in Harahan, Louisiana, and two natural foods facilities located in Livermore, California.

The company is also on track to complete an organizational redesign and further invest its incremental savings in key products such as Smucker’s Uncrustables, coffee, and snacks. It also plans to invest in new growth opportunities to expand its presence in China.

Smucker’s peers J&J Snack Foods (JJSF), TreeHouse Foods (THS), and Post Holdings (POST) have returned -0.9%, 26%, and 32% year-to-date, respectively. The PowerShares DWA Momentum ETF (PDP) invests 0.94% of its portfolio in SJM.

Advertisement

More From Market Realist