Sara Lee 2011 Annual Report Download - page 64

FINANCIAL REVIEW 2011 versus 2010
Net sales increased by $327 million, or 10.2%.
The impact of foreign currency changes, particularly in the European euro and Brazilian real, increased reported net sales by $27 million, while acquisitions increased net sales by $33 million. The change in net sales was negatively impacted by the additional 53rd week in the prior year. Adjusted net sales increased by $315 million, or 9.9% due to pricing actions, which included increased trade promotion activity, higher green coffee export sales and an improved sales mix partially offset by lower unit volumes. Pricing actions increased net sales by 6.0%. Unit volumes decreased 2.2% due to unit volume declines in the retail channel. Retail volumes in Europe decreased due to volume declines in traditional roast and ground due in part to the impact of multiple price increases to recover higher commodity costs as well as competitive pressures from private label and hard discounters and weak economic conditions throughout Europe, which was partially offset by increases in single serve coffee volumes in France and an increase in instants. The volume declines in Europe were partially offset by improved volumes in the Asian region. Unit volumes in the foodservice channel remained virtually unchanged.
Operating segment income decreased $140 million, or 23.6%.
Adjusted operating segment income decreased $104 million, or 17.5% due to the negative impact of higher commodity costs, $55 million of foreign currency hedging losses related to raw material purchases and higher MAP spending, which were only partially offset by the impact of pricing actions and a favorable shift in sales mix. International Beverage
Dollar Percent Dollar Percent
In millions 2011 2010 Change Change 2010 2009 Change Change Net sales $3,548 $3,221 $«327 10.2 % $3,221 $3,062 $159 5.2 % Less: Increase/(decrease) in net sales from
Changes in foreign currency exchange rates $÷÷÷«– $÷÷(27) $÷«27 $÷÷÷«– $÷(124) $124 Acquisitions/dispositions 34 1 33 12 1 11 Impact of 53rd week – 48 (48) 48 – 48 Adjusted net sales $3,514 $3,199 $«315 9.9 % $3,161 $3,185 $«(24) (0.8) %
Operating segment income $÷«452 $÷«592 $(140) (23.6) % $÷«592 $÷«493 $««99 20.0 % Less: Increase/(decrease) in
operating segment income from Changes in foreign currency exchange rates $÷÷÷«– $÷÷««(6) $÷÷«6 $÷÷÷«– $÷÷(17) $÷17 Project Accelerate charges (1) (12) 11 (12) (53) 41 Spin-off related costs (1) – (1) – – – Impairment charges (6) – (6) – – – Curtailment gain – – – – 12 (12) International stranded overhead charges (32) – (32) – – – Gain on property disposition – – – – 14 (14) Acquisitions/dispositions 3–3 1–1 Impact of 53rd week – 17 (17) 17 – 17 Adjusted operating segment income $÷«489 $÷«593 $(104) (17.5) % $÷«586 $÷«537 $÷49 8.8 % Gross margin % 36.7 % 42.7 % (6.0) % 42.8 % 40.1 % 2.7 %
2010 versus 2009
Net sales increased by $159 million, or 5.2%.
The impact of changes in foreign currency exchange rates, particularly in the European euro and Brazilian real, increased reported net sales by $124 million, while the 53rd week increased net sales by $48 mil- lion. Acquisitions net of dispositions, increased net sales by $11 mil- lion. Adjusted net sales decreased by $24 million, or 0.8%, due to lower green coffee export sales, increased trade promotions and an unfavorable shift in sales mix, partially offset by an increase in unit volumes. Pricing actions, which included increased trade promotion activity, reduced net sales by approximately 1%. Unit volumes increased 1.4% due to volume growth in single serve coffee, traditional roast and ground and instants, while overall coffee concentrate volumes were virtually unchanged. Retail volumes in Europe decreased due to volume declines in traditional roast and ground coffee due in part to competitive pressures from private label and hard discounters as well as weak economic conditions throughout Europe, which was partially offset by increases in single serve coffee volumes primarily in France and Germany. The volume declines in Europe were offset by improved volumes in Brazil. Unit volumes in the foodservice channel in Europe decreased due to continued weak economic conditions in Europe.
Operating segment income increased by $99 million, or 20.0%.
Adjusted operating segment income increased by $49 million, or 8.8%, due to lower commodity costs including the impact of hedging gains, the increase in unit volumes, and the benefits of continuous improvement programs, partially offset by the negative impact of pricing actions and higher MAP spending.