UPDATE: Hershey 4Q Profit Up; Co Open To Making Acquisitions

Hershey Co. (HSY) reported a 54% jump in its fourth-quarter profit due to better pricing and improved supply-chain efficiencies, and the U.S. confectioner said it is open to making acquisitions to speed up growth.

On a conference call, Chief Executive David West said the company's management and board unanimously decided not to bid for Cadbury PLC (CBY) after a "thorough and complete examination." The company is still open to growing through mergers and acquisitions, he said, adding that it will evaluate future acquisition opportunities in "the same disciplined manner."

The company said it has strong cash flow and that it continues to have board level discussions on potential uses of cash.

The candy maker also boosted its quarterly dividend by 7.6% to 32 cents a share and projected 2010 earnings to rise 6% to 8% on net sales growth in the 3% to 5% range, a view it said was consistent with its long-term objective. Analysts polled by Thomson Reuters predict earnings of $2.28 a share, or up 7%, on sales of $5.5 billion, a 4% increase from 2009.

Hershey, which has been boosting its marketing spending, said it will continue to invest in its brands and its international markets. The company said advertising was up 50% in the fourth quarter and the increase helped push sales of its brands. For this year, the company expects advertising to be up 25% to 30% from a year earlier.

Hershey, which currently gets the bulk of its sales from the slow-growth U.S. market, is limited in its ability to push overseas, and the company is facing growing competition from its larger rivals. Industry consolidation by Mars Inc., which bought Wm. Wrigley Jr. Co. in 2008 and Kraft Foods Inc.'s (KFT) planned takeover of U.K. confectioner Cadbury PLC (CBY, CBRY.LN) has put Hershey in a difficult position as a smaller player in the global confectionary market.

On the conference call, West said the board and management are still confident in the company's prospects and that the global confectionary category still offers opportunities to expand.

On Tuesday, Hershey posted a profit of $126.8 million, or 55 cents a share, up from $82.2 million, or 36 cents a share, a year earlier. Excluding charges associated from the company's restructuring, earnings rose to 63 cents from 59 cents.

Net sales grew 2.2% to $1.41 billion. Analysts expected earnings of 60 cents on net sales of $1.42 billion. Gross margin jumped to 40.5% from 36.1% as costs fell.

The company expects pressure on drug store sales in the first half of the year but said overall it expects to do well on chocolate sales during the Easter holiday.

-By John Kell, Dow Jones Newswires; 212-416-2480; [e-mail]

-By Anjali Cordeiro; Dow Jones Newswires; 212-416-2208; [e-mail]