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HSY » Topics » Increases in raw material and energy costs along with the availability of adequate supplies of raw materials could affect future financial results.

This excerpt taken from the HSY 10-K filed Feb 19, 2010.

Increases in raw material and energy costs along with the availability of adequate supplies of raw materials could affect future financial results.

We use many different commodities for our business, including cocoa products, sugar, dairy products, peanuts, almonds, corn sweeteners, natural gas and fuel oil.

Commodities are subject to price volatility and changes in supply caused by numerous factors, including:

 

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Commodity market fluctuations;

 

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Currency exchange rates;

 

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Imbalances between supply and demand;

 

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The effect of weather on crop yield;

 

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Speculative influences;

 

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Trade agreements among producing and consuming nations;

 

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Supplier compliance with commitments;

 

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Political unrest in producing countries; and

 

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Changes in governmental agricultural programs and energy policies.

Although we use forward contracts and commodity futures and options contracts, where possible, to hedge commodity prices, commodity price increases ultimately result in corresponding increases in our raw material and energy costs. If we are unable to offset cost increases for major raw materials and energy, there could be a negative impact on our results of operations and financial condition.

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