Cost-cutting measures take bite from Hershey's profits

HARRISBURG, Pa. — Hershey, the nation's largest candy maker, reported Thursday a slight increase in first-quarter revenues, but said cost-cutting measures resulted in a nearly 24 percent drop in profits.

The Hershey Co. said it earned $93.5million, or 40 cents a share, for the three months ending April 1. That compares with a gain of $122.5 million, or 50cents a share, in the same period a year earlier.

Without a one-time charge of $40.4 million for costs to restructure the company's supply chain, the company said, it would have earned $118.8 million, or 51 cents a share, which matched the forecast of analysts surveyed by Thomson Financial.

Last year's first-quarter earnings included a pretax charge of $1.7 million, or a penny per share.

The restructuring plan for Hershey, announced Feb. 15, is geared to save as much as $190 million a year. Under the restructuring, Hershey plans to cut 1,500jobs and open a plant in Monterrey, Mexico. The proportion of Hershey's manufacturing in the United States and Canada will shrink from 94percent to 80percent by 2010, the company has said.

Hershey has a plant in Oakdale, where more than 600 workers make Hershey's Kisses, Reese's Peanut Butter Cups and Hershey Miniatures. No job cuts have been announced there.

Hershey spokesman Kirk Saville said Thursday the company had no new information about the Oakdale plant.

Although it has pledged to retrench its marketing efforts, the company said it suffered lingering effects from sluggish sales that hurt its performance in the second half of 2006.

"This is being driven in part by marketplace performance that has not yet achieved desired levels," the company's chairman and chief executive, Richard H. Lenny, said in a statement.

A product recall and six-week plant shutdown in Canada last year slowed sales, but the company said sales stumbled and it lost ground to competitors as it tried to shift from marketing limited-edition candies to newer products such as its Cacao Reserve and 100-calorie candy lines.