(Reuters) - Hershey (HSY) forecast annual profit below Wall Street estimates on Thursday as record cocoa prices weigh on the Kit Kat maker's margins.
Packaged food companies including Hershey have had to raise prices to combat high raw material costs, especially for cocoa, whose prices nearly tripled in 2024.
Lower supply for a fourth consecutive season in West Africa following dry weather is also said to impact prices. Hershey's results also echoed that of larger rival Mondelez, which forecast a bigger-than-estimated drop in its annual profit, anticipating more pressure from surging cocoa prices.
Hershey now forecasts 2025 adjusted earnings per share to be between $6.00 and $6.18, well below analysts' expectations of $7.34 per share, according to estimates compiled by LSEG.
Company CEO Michele Buck said she expects the surge in cocoa prices to put "significant pressure on 2025 earnings."
Shares of the company, however, rose about 3% in premarket trading after reporting better-than-expected fourth-quarter results.
Hershey saw a rebound in demand with volumes rising 6% in the quarter, mainly due to strength in its North America salty snacks business. Overall prices remained high, rising 3% in the quarter ended Dec. 31.
Its fourth-quarter sales rose nearly 9% to $2.89 billion from a year ago, compared with estimates of $2.84 billion.
On an adjusted basis, the company earned $2.69 per share for the quarter, beating expectations of $2.37 per share.
(Reporting by Aamir Sohail and Aishwarya Venugopalin Bengaluru; Editing by Shreya Biswas)
