Hormel Reports Solid Top-line Momentum22 February 2013
US - Hormel's CEO commented on the company's first quarter results, saying they showed "solid top-line momentum" with many of its franchises. Weaker results were delivered by Jennie-O Turkey Store and Refrigerated Foods, which was hit by poor pork processing margins, while results were boosted by strong pork export growth.
Among the highlights of Hormel Foods Corporation's fiscal year 2013 first quarter report are segment operating profit even with the same period of last year. Diluted earnings per share (EPS) were $0.48, even with last year.
Compared to the first quarter of the 2012 year, overall sales were up four per cent in value to $2.1 billion and increased two per cent in volume.
Grocery Products operating profit was up 13 per cent and volume up 20 per cent (volume up four per cent excluding sales of Don Miguel products); dollar sales were up 24 per cent (up four per cent excluding sales of Don Miguel products).
Refrigerated Foods' operating profit was even with last year; volume and dollar sales were each down two per cent.
Jennie-O Turkey Store's operating profit was 23 per cent lower; while volume was even with last year, dollar sales were up three per cent.
Specialty Foods' operating profit was up 43 per cent; volume was up by one per cent and dollar value by seven per cent.
All Other (International) operating profit was up 37 per cent; volume was five per cent higher and dollar sales were up by four per cent.
The company reported fiscal 2013 first quarter net earnings of $129.7 million, up one per cent from earnings of $128.4 million a year earlier. Diluted earnings per share for the quarter were $0.48 this year, even with last year. Sales totalled $2.1 billion, which was up four per cent from the same period in fiscal 2012.
Jeffrey M. Ettinger, chairman of the board, president and chief executive officer, commented: "We continue to generate solid top-line momentum with many of our franchises, as our broad portfolio of value-added products resonates with consumers. In terms of operating profits, strong results by our Specialty Foods, Grocery Products and All Other (International) segments offset weaker results by our Jennie-O Turkey Store segment. Results in our Refrigerated Foods segment, while even with a year ago, were hindered by poor pork processing margins. Overall, earnings per share of $0.48 during the quarter were consistent with our expectations for the start of fiscal 2013.
"Our Specialty Foods team delivered impressive earnings on significant sales growth and improved operating efficiencies. Our Grocery Products segment turned in a fine quarter, led by sales of the SPAM® family of products, HORMEL® chili, MARY KITCHEN hash and HERDEZ® salsa. Our International team achieved strong earnings growth supported by fresh pork exports and higher profits by our operations in China.
"Although our team at Jennie-O Turkey Store was confronted with higher grain costs and lower commodity turkey meat prices, we are encouraged by the continued growth in sales of our value-added turkey products, including JENNIE-O TURKEY STORE® fresh tray pack products and turkey bacon.
"At the beginning of our second quarter, we closed on the acquisition of the SKIPPY® peanut butter business, excluding China. Since then, we have begun to integrate the business into our Grocery Products and International operating units and are actively working on information technology, logistics and other support projects aimed at delivering synergistic benefits. Our organization is excited about this wonderful new addition to our product portfolio and about its growth prospects," said Mr Ettinger.
Segment operating highlights for first quarter 2013
Grocery Products (16 per cent of net sales, 25 per cent of total segment operating profit)
Grocery Products operating profit increased 13 per cent. Sales including Don Miguel products grew 24 per cent, led by sales of the SPAM family of products, HORMEL chili, MARY KITCHEN hash and HERDEZ salsa. Sales growth of the COMPLEATS® microwave meals was aided by the introduction of new Cheesy Pasta items.
Refrigerated Foods (50 per cent of net sales, 26 per cent of total segment operating profit)
Segment profit for Refrigerated Foods was even with last year on a sales decline of two per cent. Improved results with value-added products and by the Affiliated Business Units were unable to fully offset weaker pork operating margins and increased costs in live production operations. Improved results in the value-added businesses were led by retail sales of HORMEL pepperoni, HORMEL NATURAL CHOICE® sliced deli meats in both the retail and food-service channels, and by food-service sales of HORMEL Fire Braised meats.
Jennie-O Turkey Store (18 per cent of net sales, 29 per cent of total segment operating profit)
Segment profit for Jennie-O Turkey Store declined 23 per cent on a sales increase of three per cent, as higher sales of value-added products did not offset higher grain costs and weaker commodity turkey prices. Value-added sales grew in retail, food-service and deli trade channels, led by retail sales of JENNIE-O TURKEY STORE fresh tray pack, turkey franks and turkey bacon.
Specialty Foods (11 per cent of net sales, 12 per cent of total segment operating profit)
Specialty Foods segment profits rose an impressive 43 per cent on a sales gain of seven per cent and improved operating efficiencies. Sales growth was led by sales of Hormel Health Labs products, private label canned meats and savoury ingredients.
All Other (five per cent of net sales, eight per cent of total segment operating profit)
The All Other segment, which consists primarily of Hormel Foods International, posted segment profits that were up a strong 37 per cent on sales growth of four per cent. Results were primarily driven by higher fresh pork exports and better results by our operations in China.
General Corporate Expense
Several factors affected general corporate expense which, in aggregate, resulted in lower expenses. No single factor was material in relationship to the total expenses incurred in the quarter.
Mr Ettinger commented: "We are pleased with the growth being demonstrated by our Grocery Products, Specialty Foods and All Other (International) segments, and anticipate continued success going forward.
"Our Refrigerated Foods segment is presently facing weaker pork operating margins and challenges in live hog production operations, though we expect those factors to slowly improve.
"Our Jennie-O Turkey Store segment will post weaker results in comparison to last year’s record year. We expect these challenges to continue in the near term and gradually diminish thereafter.
"We continue to expect modest accretion from the SKIPPY acquisition in fiscal 2013, but note that one-time transaction and transition costs related to the acquisition will fall primarily in our second quarter. Taking all of these factors into account, we are raising our full-year guidance to $1.93 to $2.03 per share from $1.90 to $2.00 per share," concluded Mr Ettinger.
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