US food group Hormel Foods saw its profits accelerate in the final quarter of its financial year amid stronger earnings from its grocery products business.
Hormel, which makes Spam canned meat, booked a 13% increase in net earnings to US$134.3m for the three months to 28 October. Across the group, fourth-quarter sales were up 3% at $2.2bn.
Operating profit from its grocery products arm was up 22%, boosted by a 17% increase in volumes. A contribution from taco and burrito business Don Miguel Foods, which Hormel's Mexican food venture MegaMex Foods, helped volumes.
Profits from Hormel's Jennie-O Turkey Store turkey unit, its speciality foods business and its international operations increased in the quarter. Earnings from refrigerated foods dropped amid lower pork margins.
Over the financial year as a whole, Hormel's net earnings increased 5.5% to $500.1m. Hormel posted "record" annual net sales of $8.2bn, up 4%.
Looking to the new financial year, Hormel chairman, president and CEO Jeffrey Ettinger said the company expects sales and earnings to grow but admitted its Jennie-O Turkey Store arm will face higher grain costs.
"We plan on making additional cuts to both our turkey and pork harvest levels during fiscal 2013, to reduce our exposure to volatile commodity markets," he added.
Shares in Hormel were down 3.99% at $30.05 at 16:35 ET
Hormel Foods Reports Fourth Quarter, Record Full Year Results
AUSTIN, Minn.--(BUSINESS WIRE)--Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2012 fourth quarter and full year.
All comparisons are to the fourth quarter or full year of fiscal 2011.
HIGHLIGHTS
Fourth Quarter
Diluted EPS of $.49, up 14 percent from $.43 per share Segment operating profit increased 4 percent Dollar sales of $2.2 billion, increased 3 percent; volume up 2 percent Grocery Products operating profit up 22 percent; volume up 17 percent (volume up 2 percent excluding sales of Don Miguel products); dollar sales up 21 percent (sales up 3 percent excluding sales of Don Miguel products) Refrigerated Foods operating profit down 12 percent; volume flat; dollar sales down 3 percent Jennie-O Turkey Store operating profit up 5 percent; volume down 2 percent; dollar sales up 5 percent Specialty Foods operating profit up 8 percent; volume down 2 percent; dollar sales up 7 percent All Other (primarily Hormel Foods International) operating profit up 24 percent; volume up 3 percent; dollar sales up 1 percent
Fiscal Year
Record diluted EPS of $1.86, up 7 percent from diluted EPS of $1.74 Segment operating profit up 1 percent Record dollar sales of $8.2 billion, up 4 percent; volume flat Grocery Products operating profit up 12 percent; volume up 6 percent (volume down 2 percent excluding sales of Don Miguel products); dollar sales up 10 percent (sales up 1 percent excluding sales of Don Miguel products) Refrigerated Foods operating profit down 22 percent; volume down 1 percent; dollar sales up 1 percent Jennie-O Turkey Store operating profit up 16 percent; volume down 2 percent; dollar sales up 6 percent Specialty Foods operating profit up 8 percent; volume up 1 percent; dollar sales up 11 percent All Other (primarily Hormel Foods International) operating profit up 38 percent; volume up 4 percent; dollar sales up 7 percent
The company reported fiscal 2012 fourth quarter net earnings of $132.6 million, up 13 percent from earnings of $117.3 million a year earlier. Diluted earnings per share for the quarter were $0.49, up 14 percent compared to $0.43 last year. Sales for the quarter were $2.2 billion, up 3 percent from the same period in fiscal 2011.
For the year ended October 28, 2012, net earnings were $500.1 million, up 5 percent from net earnings of $474.2 million last year. Diluted net earnings per share were $1.86, up 7 percent from diluted net earnings per share of $1.74 last year. Sales for the year ended October 28, 2012, totaled $8.2 billion, up 4 percent from last year.
COMMENTARY
"We achieved solid results in the quarter with earnings per share and sales up 14 percent and 3 percent, respectively. We are pleased to have generated both segment profit and sales increases in four out of five segments. We continue to enjoy sales and volume growth in many of our value-added franchises, demonstrating that our growth strategies are working," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.
"In looking at the full year, we finished in the upper half of our guidance range. We delivered sales growth of 4 percent, ending the year at a record $8.2 billion, with all five segments registering increases. We also grew earnings per share by 7 percent, finishing at record earnings of $1.86 per share. We enjoyed another strong performance by our Jennie-O Turkey Store and International teams. Our Grocery Products and Specialty Foods segments also generated nice profit increases for the year. We enhanced our support of our key HORMEL and JENNIE-O TURKEY STORE brands in fiscal 2012 with effective advertising campaigns, and ran a new advertising campaign celebrating the 75th anniversary of our iconic SPAM brand. Finally, we met our goal of $2 billion in sales of new products by 2012," commented Ettinger.
"This morning we announced an $.08 per share increase to the annual dividend (or 13 percent), making the new dividend $.68 per share. This marks the 47th consecutive year in which we have increased our dividend, and provides further evidence of our intention to deliver superior total returns to our shareholders," stated Ettinger.
SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER
Grocery Products (16% of Net Sales, 26% of Total Segment Operating Profit)
The Grocery Products segment profit increased 22 percent, led by strong sales of the SPAM® family of products and the portfolio of products within our MegaMex Foods joint venture. Sales for the quarter were up 21 percent, with contributions by the aforementioned products and HORMEL® chili.
Refrigerated Foods (49% of Net Sales, 30% of Total Segment Operating Profit)
Refrigerated Foods segment profit declined 12 percent, as strong results in our value-added businesses were not able to fully offset lower pork operating margins and losses in our live hog operations. Sales for the quarter were down 3 percent, due to lower commodity meat prices. Value-added products grew in the quarter, led by HORMEL® pepperoni and party trays in the Meat Products group and HORMEL® NATURAL CHOICE® deli meats in the Foodservice group.
Jennie-O Turkey Store (20% of Net Sales, 26% of Total Segment Operating Profit)
Jennie-O Turkey Store had another solid quarter, with segment profit up 5 percent. The continued sales growth of value-added products and an improved product mix offset higher feed costs during the quarter. Sales for the quarter increased 5 percent, led by sales of JENNIE-O TURKEY STORE® fresh tray pack, turkey bacon and turkey burgers.
Specialty Foods (11% of Net Sales, 12% of Total Segment Operating Profit)
The Specialty Foods segment posted operating profits 8 percent higher than last year on a 7 percent increase in sales. Higher sales of private label canned meats contributed to the improved results.
All Other (4% of Net Sales, 6% of Total Segment Operating Profit)
The All Other segment, which consists primarily of Hormel Foods International, posted segment profits that were 24 percent ahead of last year, while sales grew 1 percent. Strong export sales to Canada and improved margins in the SPAM® family of products contributed to the results.
General Corporate Expense
General corporate expenses were lower, driven principally by a reduction in the lower of cost or market inventory reserve and lower employee related costs.
OUTLOOK
"We expect to deliver sales and earnings growth in fiscal 2013. In particular, we are looking for our Refrigerated Foods, Grocery Products, Specialty Foods and All Other (International) segments to drive profit growth in fiscal 2013, as our Jennie-O Turkey Store segment goes up against higher grain costs and historically high results. We plan on making additional cuts to both our turkey and pork harvest levels during fiscal 2013, to reduce our exposure to volatile commodity markets. Taking all of the relevant factors into account, we are setting our 2013 guidance range at $1.90 to $2.00 per share," remarked Ettinger.
