Hershey Heats Up on Sweeter Dividend

HERSHEY, Penn. ( TheStreet) -- Hershey ( HSY) shares were gaining ground on Wednesday after the candy and chocolate maker met fourth-quarter expectations on strong holiday sales and announced a 7.8% increase to its quarterly dividend.

Hershey attributed its sweetened results to strong sales during the holiday shopping season, and to growing demand in emerging markets.

Hershey shares added 2.1% to $48.12 Wednesday afternoon.

Hershey said it made significant advertising investments in 2010 in U.S. and select emerging markets, a strategy it intends to slow somewhat this fiscal year but should help it continue to drive global sales in 2011.

The company plans to launch new miniature versions of some of its legacy candies this year, including Hershey's Drops and Reese's Minis, while continuing a planned roll-out of Hershey's and Hershey's Kisses brands in select emerging markets "where we are gaining consumer awareness, trial and most importantly, repeat purchases."

Hershey is not alone in its push to grow in global markets. A number of U.S.-based food and beverage companies like Yum! Brands ( YUM), McDonald's ( MCD), Cheesecake Factory ( CAKE) and Starbucks ( SBUX) have also planned global expansions.

The candy maker updated its 2011 outlook, saying it now expects full-year sales and adjusted earnings per share to come in near the top end of its long-term 3% to 5% and 6% to 8% guidance, respectively. Based on 2010 results, that means Hershey expects to earn close to 68 cents per share this fiscal year on sales of nearly $1.48 billion.

Hershey said it increased its quarterly dividend by 7.8% to 34.5 cents per share, and declared a dividend of 31.25 cents on its Class B Common Stock, also up by 7.8%. The dividends will be payable on March 15 to holders of record on Feb. 25.

The maker of Reese's, Twizzlers and Kit Kat confections brands said it expects adjusted gross margins to be relatively flat in 2011 year-over-year despite "meaningfully higher input costs."

Cocoa prices surged recently following a one-month ban on exports imposed in the Ivory Coast, the world's biggest cocoa producer, which could tighten world cocoa supplies. Sugar prices spiked to a three-decade high on Wednesday after Australia's already flood-stricken Queensland coast was hit with strongest cyclone the nation has seen in 100 years.

Hershey said that despite higher ingredient costs this year, "productivity and cost savings initiatives are in place" and "we continue to leverage the global go-to-market capabilities we have built over the past few years."

In the recent quarter, Hershey booked a 5.4% increase in revenue to $1.48 billion, driven primarily by volume, including continued faster-paced growth in emerging markets and strong results at key retail customers.

Hershey said its U.S. retail takeaway in the fourth quarter accounted for more than 80% of its total U.S. retail business, up 6.2% year-over-year.

Adjusted quarterly earnings came in at a 61 cents per share, or $140.4 million. Adjustments were made for pre-tax charges of $7.9 million, or 2 cents per share, related to the Project Next Century program announced in June. The program includes a $250 million to $300 million capital investment to update its century-old production facility in Hershey, Pa., and is expected to generate savings of up to $80 million.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

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