Hill’s Pet Nutrition (13% of Company Sales)
Hill’s Net sales decreased 1.0% during fourth quarter 2012. Unit volume decreased 2.5%, pricing increased 2.5% and foreign exchange was negative 1.0%. Volume declines in the U.S., Europe and Japan were partially offset by volume gains in Brazil and South Africa. Hill’s organic sales were even with the year ago period.
Hill’s Operating profit decreased 2% in the fourth quarter of 2012 to $149 million, or 26.7% of Net sales. This decrease in Operating profit as a percentage of Net sales was due to an increase in Selling, general and administrative expenses as a percentage of Net sales, which was partially offset by an increase in Gross profit as a percentage to Net sales. This increase in Gross profit was driven by cost savings from the Company’s funding-the-growth initiatives and higher pricing, which were partially offset by higher raw and packaging material costs. This increase in Selling, general and administrative expenses was primarily due to higher overhead and advertising expenses.
Recent new product introductions contributing to sales in the U.S. include Science Diet Ideal Balance canine and feline, which combine natural ingredients with the power of advanced nutrition in one balanced package, Science Diet Tender Dinners feline, Prescription Diet i/d Canine Low Fat GI Restore, specially formulated to help manage gastrointestinal disorders, and the relaunch of Science Diet Canine with new formulas and improved package design.New pet food products contributing to international sales include new flavors for Prescription Diet i/d, k/d and c/d pouches, the launch of Science Plan and Science Plan VetEssentials pouches, reformulated Science Plan Puppy Large Breed, Prescription Diet y/d Feline Thyroid Health, reformulated Science Plan Adult and Mature Adult Canine and Feline with improved taste and the relaunch of Science Plan Nature’s Best with upgraded ingredients and package design.