NEW YORK – The Hershey Co. said Tuesday that sales of two new products — Hershey's Drops and Reese's Minis — and rising overall revenue in China, Brazil and Mexico helped its first-quarter revenue rise 11 percent and its net income climb nearly 9 percent.
Also contributing to the revenue boost, Hershey said, were two short-term factors: Easter fell later than usual this year, which pushed sales that would usually come in the fourth quarter into the first. Also, some retailers stocked up on Hershey products before price increases announced in March started taking effect.
Hershey said its revenue will grow slower the rest of the year, but it expects a pace near the top of the range of 3 percent to 5 percent it forecast in February.
The price hikes may not trickle down to consumers until early next year, and the company said it will offer promotions to make them more palatable.
Heavy advertising — including a 30 percent boost in ad spending, partly the result of the extended pre-Easter period — helped draw first-quarter sales, Hershey said. It plans to start reining in that expense this month.
Hershey also said Tuesday that it plans to buy back $250 million in shares, a move companies often make in the hope of bolstering share prices. Hershey shares are already near their 52-week high.
The stock was up 57 cents, or 1.1 percent, at mid-afternoon Tuesday, trading at $57.20. It has traded in a range from $44.75 to $58.20 the past 52 weeks.
Chris Growe, an analyst at Stifel Nicolaus, questioned why the company wasn't buying back more shares and said he guessed Hershey wants to keep cash on hand to buy other companies abroad.
"The international confectionary markets, particularly the emerging markets, are extremely fragmented and thus likely present a target-rich environment for a company like Hershey," Growe wrote in a note to clients.
He said the approach could be risky given the company's current lack of international exposure.
Like many U.S. companies, Hershey is looking abroad for new revenue to compensate for any continuing weakness in the U.S. economy. Hershey also is competing with two much-larger rivals: Kraft Food Inc., which beat Hershey last year in the bid for U.K.-based Cadbury, and Mars Inc.
Chief financial officer Bert Alfonso said first-quarter sales were "especially strong" in Mexico, China and Brazil.
Hershey recently started selling its products through Wal-Mart Stores Inc.'s U.K. chain, Asda, and it plans more expansion in South America and Asia.
CEO Dave West said that selling Hershey candy in Asda stores, though it produces relatively little revenue, is key to the company's strategy.
"It's not material (now)," West said. "But I think it's more important for us to demonstrate that our brands can play in a number of markets around the world and that we are flexible enough to make it work."
Hershey's net income rose to $160 million, or 70 cents per share, compared with $147 million, or 64 cents per share, in the period a year earlier. Excluding one-time items, it earned 72 cents per share, beating analysts' average forecast for 70 cents, according to FactSet.
Revenue rose to $1.56 billion and beat analysts' average forecast for $1.49 billion.
Hershey reiterated its forecast for full-year revenue growth of 3 percent to 5 percent and for an increase of 6 percent to 8 percent in earnings per share.
There are fears in the United States, one of the largest consumers of gasoline and crude oil in the world, that gasoline prices may rise to $5 or even $6 per gallon because of unrest in the Middle East. Gasoline doesn't just simply show up at the pump as gas for cars. It starts out as crude oil and is refined into gas at the pump.
Here is a brief look at how crude oil becomes gasoline for modern consumption.
The story of gasoline begins 300 million years ago when the earth was teeming with plant and animal life. The Department of Energy says that after huge biomasses of plants died, they ended up buried deep in the earth under enormous pressure and heat. The hydrocarbons in their bodies became compacted and turned into combustible materials like coal and crude oil.
Crude Oil Extraction
Crude oil, like other fossil fuels, must be extracted from the ground. Some locations are on land and easy to find. Other places, such as oil fields under deep water, are harder to extract oil. Complex machines and wells dig into the ground and pipes bring up the crude oil for transport to a refinery.
Oil is refined over several processes. The first one involves separating hydrocarbon compounds by temperature. According to the Energy Information Administration, crude oil is heated in a still and different products boil at different temperatures to be collected. Butane is the first to be given off at temperatures below 90 degrees Fahrenheit. Heavy gas oil doesn't boil until almost 1,000 degrees.
More complicated processes are used to remove sulfur and other dangerous materials. After gasoline is made, additives are put in the mixture to help make cars run more efficiently. Ethanol is also mixed in with unleaded gasoline per government requirements.
Refinery to Pump
Transporting the gasoline to gas stations is done in two steps. Pipelines run underground from refineries to distribution points all over the United States. The Association of Oil Pipelines says more than two-thirds of the gas supplies in the United States travel in secure pipelines to be taken to gas stations.
Once the gasoline gets to a distribution point, tanker trucks transport the liquid a short distance, usually a few hundred miles, to a local gas station. Now your car is ready to be filled up at the pump.
Gas pumps are regulated by the Department of Transportation and state governments. There are more choices than ever at the pump now with diesel, as many as five different octane grades of gas, and E85 mixes with 85 percent ethanol content as per EPA guidelines.
A Department of Energy study done in 2009 reports a majority of greenhouse gas emissions in the United States comes from the combustion of automobile gasoline. The carbon emissions come from the burning of hyrdocarbon fuels that burn the hydrogen content of the chemical and leave behind carbon dioxide and water.
William Browning is a research librarian.
WASHINGTON – Amid rising gasoline prices at the pump, President Barack Obama urged congressional leaders Tuesday to take steps to repeal oil industry tax breaks, reiterating a call he made in his 2012 budget proposal earlier this year.
The president wrote a letter to the bipartisan congressional leadership on Tuesday, a day after Republican House Speaker John Boehner said he was willing to "take a look at" repealing the multibillion-dollar tax subsidies enjoyed by the major oil companies.
Rising gas prices have become a political weight at the White House, with polls showing that as the cost rises at the pump, the president's approval ratings have slipped. Obama has increasingly sought to display action on oil, even as he concedes that there is no immediate answer to stem costs
"High oil and gasoline prices are weighing on the minds and pocketbooks of every American family," Obama wrote. But he also added that "there is no silver bullet to address rising gas prices in the short term."
Obama's proposal, spelled out in his budget plan, would eliminate a number of tax breaks for oil companies that would generate an estimated $4 billion a year in additional revenue.
A Boehner spokesman, Brendan Buck, said Tuesday that Obama's suggestions "would simply raise taxes and increase the price at the pump." Buck said that Boehner's willingness to examine a subsidy does not mean he is advocating its repeal.
He said Boehner "is only interested in reforms that actually lower energy costs and create American jobs."
Obama's letter was addressed to Boehner, House Democratic leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Republican leader Mitch McConnell.
Blaming the subsidies on "outdated tax laws," Obama said that money obtained from repealing the breaks should be spent on clean energy initiatives to reduce dependence on foreign oil.
On Monday, Boehner told ABC News that the government is low on revenues and that oil companies "ought to be paying their fair share."
"We certainly ought to take a look at it," Boehner said. "We're at a time when the federal government's short on revenues. We need to control spending but we need to have revenues to keep the government moving."
Obama, in his letter, said he was "heartened" by Boehner's remarks. "Our political system has for too long avoided and ignored this important step, and I hope we can come together in a bipartisan manner to get it done."
White House spokesman Jay Carney dismissed suggestions that Obama's letter was motivated by the potential effect of rising gas prices on Obama's political prospects.
"I don't think when somebody sticks the credit card in the pump or pays a cashier the cash for a tank of gas that they're thinking about an election in 2012," he said.