01—Abstract
Summary
Summary of the 10-K filed February 20, 2024. Cited figures are marked; the original filing is the authoritative source.
The Hershey Company reported 2023 net sales of $11,165.0 milliona, up 7.2% from $10,419.3 million in 2022, driven primarily by price realization of 8.3%, partially offset by a 1.3% volume decrease.
Gross margin rose to 44.8% from 43.2%, and operating profit increased 13.3% to $2,560.9 millionb. Net income attributable to The Hershey Company was $1,861.8 million, up 13.2%, and diluted EPS was $9.06 compared with $7.96 in 2022. Management attributed the earnings growth mainly to higher gross profit, partly offset by higher SM&A expenses, which rose 9.0%, and higher income taxes and other expense.
Cash flow from operations was $2.32 billionc in 2023, roughly flat versus $2.33 billion in 2022. Capital expenditures rose to $771.1 million, and the company expects 2024 capital expenditures of approximately $600 million to $650 million. Cash dividends paid totaled $889.1 million, with the quarterly common dividend raised to $1.370 per share for March 2024.
Total debt was $4.8 billiond at year-end 2023, and the company repurchased shares, including a 1,000,000-share purchase from the Milton Hershey School Trust at $239.91 per share. Management also noted that the Board approved the Advancing Agility & Automation Initiative in February 2024, which is estimated to cost $200 million to $250 million in pre-tax charges through 2026, with ongoing annual savings of approximately $300 million expected at program conclusion. The company faces risks tied to cocoa price volatility, which rose an average of approximately 32% during 2023, along with pressure on consumer demand, with volume declining 1.3% in the year.
McLane Company accounted for approximately 28% of 2023 net sales. The 2023 acquisition of Weaver Popcorn manufacturing assets added capacity to the North America Salty Snacks segment.
02—Key points
Key Highlights
- Net sales rose 7.2% to $11,165.0 million, with price realization of 8.3% more than offsetting a 1.3% volume decline.
- Gross margin expanded to 44.8% from 43.2%, and operating profit grew 13.3% to $2,560.9 million.
- Diluted EPS increased to $9.06 from $7.96, and net income attributable to The Hershey Company rose 13.2% to $1,861.8 million.
- Cocoa futures prices averaged $1.49 per pound in 2023 versus $1.13 in 2022, and management cites cocoa as the primary incremental cost pressure.
- Capital expenditures increased to $771.1 million, and 2024 capex is expected at approximately $600 million to $650 million.
- Dividends paid totaled $889.1 million in 2023, and the Board approved a $500 million additional share repurchase authorization in December 2023.
- The Advancing Agility & Automation Initiative, approved February 2024, is expected to cost $200 million to $250 million and yield ongoing annual savings of approximately $300 million by 2026.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Hershey kept $0.17.
- Revenue$11.16B100.0%
- Cost of revenue−$6.17B55.2%
- Gross profit$5.00B44.8%
- Operating costs−$2.44B21.8%
- Operating income$2.56B22.9%
- Interest, other & tax−$699.1M6.3%
- Net income$1.86B16.7%
Where FY2023 revenue went
$11.16B- Cost of revenue: $6.17B, 55% of revenue
- SG&A: $2.44B, 22% of revenue
- Net income: $1.86B, 17% of revenue
- R&D: $50.0M, 0.4% of revenue
- Interest, other & tax: $699.1M, 6.3% of revenue
Kept 17% as net incomeR&D $50.0M · 0.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 20, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $11.16B$10.42B | +7.2% |
| Cost of Revenue | $6.17B$5.92B | +4.2% |
| Gross Profit | $5.00B$4.50B | +11.1% |
| R&D Expenses | $50.03M$46.94M | +6.6% |
| SG&A Expenses | $2.44B$2.24B | +9.0% |
| Operating Income | $2.56B$2.26B | +13.3% |
| Interest Expense | $176.07M$148.23M | +18.8% |
| Net Income | $1.86B$1.64B | +13.2% |
05—Questions
Frequently Asked Questions
How did Hershey perform financially in 2023?
Net sales increased 7.2% to $11,165.0 million, primarily from higher list prices. Operating profit rose 13.3% to $2,560.9 million, and net income attributable to The Hershey Company increased 13.2% to $1,861.8 million, or $9.06 per diluted share.
What are the main risks to Hershey's margins?
Commodity costs are the main risk. Cocoa futures averaged $1.49 per pound in 2023, up from $1.13 in 2022, and the company cites higher direct material prices as the primary incremental cost. Consumer demand is also under pressure, with a 1.3% volume decline in 2023.
How much cash did Hershey return to shareholders?
Cash dividends paid were $889.1 million in 2023, up from $775.0 million in 2022. Share repurchases totaled $267.3 million, including $239.9 million from the Milton Hershey School Trust. The Board also approved an additional $500 million repurchase authorization in December 2023.
Who controls Hershey, and how is that relevant to investors?
Hershey Trust Company, as trustee for the Milton Hershey School Trust, maintains voting control over the company. The Class B Common Stock carries 10 votes per share and is held by the trust, which was entitled to cast approximately 79% of votes. Pennsylvania law makes an acquisition of a majority of voting stock more difficult.
What is the Advancing Agility & Automation Initiative?
It is a multi-year productivity program approved by the Board in February 2024 to improve supply chain and manufacturing spend, optimize SM&A expenses, and automate processes. The company estimates pre-tax costs of $200 million to $250 million through 2026, with ongoing annual savings of approximately $300 million at conclusion.
06—Continue