Wrigley reaps early benefits of Joyco acquisition

Wrigley, the world's biggest gum manufacturer, has posted record Q1 profits and beat analysts' expectations - buoyed by impressive early sales from its recent acquisition of Spanish confectioner Joyco, Tom Armitage reports.

According to the Chicago-based firm, which manufactures the Doublemint and Winterfresh chewing gum brands, consolidated net operating profits increased by 18 per cent during the first three months of the year to US$131 million, compared to the previous year's.

Wrigley said that a strong performance from its core gum business, together with favourable currency movements and a 6 per cent contribution from recently acquired Joyco had helped it to achieve a 17 per cent increase in turnover from US$812.2 million to US$950 million.

The Q1 results comfortably exceeded analysts' previous turnover expectations of around US$130 million and it appears that the company's acquisitive strategy has started to pay off sooner than expected.

Wrigley notched up a 16 per cent increase across its European sales region (the Joyco acquisition alone accounted for around one third of this figure), while the emerging markets of Russia and Ukraine showed particularly strong growth stemming from its core gum business.

Its Asian region managed to achieve similarly impressive sales increases of around 39 per cent, with shipments of its Doublemint and Extra brands to China recording double digit growth.

Conversely, the more developed North American sales region notched up a slightly more modest sales increase of around 7 per cent, while sales of its best-selling brands, Orbit, Orbit White and Extra contributed to an increase in US sales volumes of around 5 per cent.

"We are pleased to have started the year with strong top and bottom line growth in the first quarter," said Ron Waters, Wrigley's chief operating officer.

"Our core gum business performed well, the Joyco acquisition contributed to volume increases, and margins increased over the same period a year ago," he added.

Wrigley acquired Spanish confectioner Joyco, which has strong positions in the bubble gum, candies and lollipops sectors, as well as a foothold in the emerging markets of India and China, in January 2004 for €215 million.

According to industry analysts Euromonitor International, both India and China are expected to be among the most important gum markets in the world over the next few years, with respective sales predicted to reach US$86.5 million and US$809 million by 2008.

Last year the company reported sales of US$3.65 billion and extended its reach into the relatively unfamiliar territory of non-chewing gum based products, particularly mints, through its $1.48 billion acquisition of Altoids from Kraft Foods - something which has helped it move resolutely into the US sugar confectionery market.

Following the Q1 announcement, Wrigley's shares rocketed US$3.09, or 4.8 per cent, to close at US$67.57 - their biggest gain in nearly three years.