HERSHEY CO SEC 10-K Report

The Hershey Company, a leading global confectionery and snacking company, has released its 2024 Form 10-K report, detailing significant financial growth, strategic initiatives, and operational highlights. The report underscores Hershey's commitment to expanding its snacking portfolio and driving international growth while navigating various market challenges.

Financial Highlights

Hershey Co reported robust financial performance for 2024, marked by increases across key metrics:

• Net Sales: $11,202.3 million, reflecting a slight increase of 0.3% from 2023 due to favorable price realization, partially offset by volume decreases.
• Gross Profit: $5,300.9 million, an increase of 6.1% from 2023, driven by favorable mark-to-market impact from commodity derivative instruments and price realization.
• Operating Profit: $2,898.2 million, up 13.2% from 2023, primarily due to higher gross profit and lower SM&A expenses.
• Net Income: $2,221.2 million, a 19.3% increase from 2023, attributed to higher gross profit, lower SM&A expenses, and lower income taxes.
• Net Income Per Share—Diluted: $10.92, an increase of 20.5% from 2023, benefiting from higher net income and share repurchases.

Business Highlights

Hershey's business performance in 2024 showcased its diverse product segments and geographical reach:

• Revenue Segments: The company operates through three main segments: North America Confectionery, North America Salty Snacks, and International. The North America Confectionery segment includes chocolate and non-chocolate confectionery, gum, refreshment products, protein bars, spreads, snack bites, and mixes. The North America Salty Snacks segment includes products like ready-to-eat popcorn, pretzels, and other snacks. The International segment covers operations in Mexico, Brazil, India, and Malaysia, with distribution in Asia, Latin America, the Middle East, Europe, and Africa.
• Geographical Performance: The North America Confectionery segment accounted for 81.4% of net sales in 2024, with a slight decrease in sales due to volume declines in everyday core U.S. confection brands. The North America Salty Snacks segment saw a 3.9% increase in net sales, driven by volume increases in Dot’s Homestyle Pretzels. The International segment experienced a slight decrease in net sales, primarily due to unfavorable foreign currency exchange rates and volume declines in Mexico and Brazil.
• New Product Launches: In November 2024, Hershey completed the acquisition of the Sour Strips brand, an emerging sour candy brand available in various food distribution channels in the United States.
• New Production Launches: In May 2023, Hershey acquired additional manufacturing capacity from Weaver Popcorn Manufacturing, Inc., enhancing its production capabilities for microwave and ready-to-eat popcorn.
• Future Outlook: Hershey aims to drive core confection business and broaden participation in snacking by expanding the boundaries of its core confection brands and increasing exposure to new snack categories through acquisitions. The company is also focused on delivering profitable international growth by efficiently allocating resources to areas with the highest potential for growth. Additionally, Hershey is working on expanding its competitive advantage through differentiated capabilities, including leveraging advanced data and analytical techniques.

Strategic Initiatives

Hershey's strategic initiatives are centered on expanding its snacking portfolio and driving international growth:

• Strategic Initiatives: Hershey's strategic initiatives focus on expanding its snacking portfolio and driving international growth. The company aims to broaden its participation in the snacking market by leveraging its core confection brands and pursuing acquisitions, such as the recent acquisition of the Sour Strips brand. Hershey is also enhancing its supply chain capabilities and enterprise resource planning system to improve efficiency and support long-term growth.
• Capital Management: Hershey's capital management activities include maintaining a strong financial position with substantial cash flow from operations. The company repaid $300 million of 2.050% Notes due in November 2024 and issued $350 million of 4.250% Notes and $400 million of 4.500% Notes in May 2023. Hershey also increased its dividend payments by 23% in 2024 and repurchased $494.2 million of its own shares, including $400 million under a pre-approved share repurchase program. The company maintains a $1.35 billion unsecured revolving credit facility and has a current shelf registration statement for issuing debt securities.
• Future Outlook: Hershey plans to continue its focus on expanding its snacking portfolio and driving profitable international growth. The company expects to maintain adequate liquidity to support its strategic initiatives and capital requirements, including potential acquisitions and capital expenditures. Hershey anticipates capital expenditures of approximately $425 million to $450 million in 2025, as spending returns to historical levels. The company also plans to repay $600 million of long-term debt maturing in 2025.

Challenges and Risks

Hershey faces several challenges and risks that could impact its business operations and financial performance:

• Reputation and Brand Image: Issues related to product quality, safety, and environmental, social, or governance practices could harm the company's reputation, leading to decreased demand and potential litigation.
• Supply Chain Disruptions: Natural disasters, pandemics, climate change, and other factors could disrupt manufacturing operations and supply chains, impacting the company's ability to produce and deliver products.
• Talent Acquisition and Retention: The company faces intense competition for global talent, which is crucial for driving growth strategies. Failure to attract and retain skilled personnel could adversely affect business performance.
• Climate Change: Increased focus on climate change and related regulations could raise operational costs and impact the availability and cost of raw materials.
• Commodity and Energy Costs: Volatility in raw material and energy costs, driven by factors like climate change and geopolitical events, could negatively impact financial results.
• Digital Transformation and Cybersecurity: Disruptions or breaches in IT infrastructure could harm operations, and the ongoing ERP system implementation poses additional risks.

Management highlights the dynamic macroeconomic environment, including price volatility in commodities like cocoa, which increased by approximately 70% in 2024. The company is also monitoring geopolitical events, such as the conflict between Russia and Ukraine, which could exacerbate supply chain disruptions and inflationary pressures. Despite these challenges, Hershey believes it has sufficient liquidity to meet strategic initiatives and is focused on expanding its snacking portfolio and enhancing supply chain capabilities.

SEC Filing: HERSHEY CO [ HSY ] - 10-K - Feb. 18, 2025