AUSTIN, Minn.– Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2010 first quarter.
First Quarter
Diluted EPS of $.82, up 37 percent from $.60 per share in 2009
Segment operating profit up 34 percent from last year
Dollar sales of $1.7 billion up 2 percent from 2009
Volume up 3 percent from 2009
Grocery Products operating profit up 37 percent; volume up 10 percent; dollar sales up 8 percent
Refrigerated Foods operating profit up 53 percent; volume flat; dollar sales down 1 percent
Jennie-O Turkey Store operating profit up 14 percent; volume up 7 percent; dollar sales up 5 percent
Specialty Foods operating profit up 28 percent; volume up 1 percent; dollar sales up 5 percent
All Other operating profit down 6 percent; volume up 5 percent; dollar sales up 1 percent
The Country Crock chilled side dish line was acquired from Unilever effective February 1, 2010
The company reported fiscal 2010 first quarter net earnings of $111.2 million, up 37 percent from earnings of $81.4 million a year earlier. Diluted earnings per share for the quarter were $.82 this year compared to $.60 per share last year. Sales totaled $1.73 billion, which was up 2 percent from fiscal 2009.
COMMENTARY
We are pleased to report record earnings and sales for the quarter. Four of our five business segments delivered double-digit profit gains during the quarter. We are particularly gratified to see the solid improvement in sales and will continue to focus our efforts in this area. Our announcement last week regarding our new Hormel brand advertising campaign demonstrates our commitment to growing our top-line, said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.
Our Grocery Products segment had an excellent quarter, with strong sales of canned meats and Mexican food products. Our Refrigerated Foods segment had a strong quarter, helped by improved cutout margins. Our Jennie-O Turkey Store segment showed strength, largely as a result of a better whole bird season. They also experienced improved sales of value-added products. Our Specialty Foods segment had a good quarter, with strong sales of private label products and sugar substitutes, while our International segment experienced weaker results, remarked Ettinger.
SEGMENT OPERATING HIGHLIGHTS FIRST QUARTER
Grocery Products (15% of Net Sales, 29% of Total Segment Operating Profit)
The Grocery Products segment achieved an impressive segment operating profit improvement of 37 percent versus 2009. Lower costs and increased revenues of our core products such as Hormel chili, Dinty Moore stews, and the SPAM family of products drove profitability. We were also pleased with the contribution from our new MegaMex Foods business. Overall, revenue increased 8 percent for the quarter.
Refrigerated Foods (52% of Net Sales, 38% of Total Segment Operating Profit)
The Refrigerated Foods segment finished a strong first quarter with segment operating profit 53 percent greater than last year, as favorable spreads between hog costs and primal values benefitted the segment. Revenue was flat for the quarter, as we experienced softer demand for hams, bacon and commodity pork. Additionally, the foodservice sales environment remains weak.
Jennie-O Turkey Store (18% of Net Sales, 18% of Total Segment Operating Profit)
Jennie-O Turkey Store improved its segment profit results by 14 percent during the first quarter. Stronger whole bird sales and better commodity meat prices helped drive results. Revenue increased 5 percent for this segment due to increased whole bird and value-added sales.
Specialty Foods (11% of Net Sales, 11% of Total Segment Operating Profit)
Segment profit for Specialty Foods increased 28 percent, with positive contributions from each of its three business units. Improved results were driven primarily by sales of private label products and sugar substitutes. Revenue grew 5 percent, led by higher contract manufacturing and sugar substitute sales.
All Other (4% of Net Sales, 4% of Total Segment Operating Profit)
The All Other segment, which consists of Hormel Foods International, experienced a segment profit decline of 6 percent for the quarter, due primarily to weaker exports of fresh pork products. Revenue was up modestly for the quarter due to strong exports of the SPAM family of products.
Net Interest and Investment Income
Net interest and investment income was negatively impacted by lower returns on the rabbi trust investments during the first quarter, compared to a year ago.
General Corporate Expense
General corporate expenses were higher in the first quarter due to increased pension and employee benefit expenses.
OUTLOOK
As a result of our better than expected results in the first quarter, we are raising our full year guidance range from $2.63 to $2.73 per share to $2.68 to $2.78 per share. We anticipate higher hog costs as we progress through the year, and we recognize the strong investment performance in our rabbi trust last year will result in a more difficult comparison. Nevertheless, we believe our strong portfolio of branded products and the strength of our dedicated team should allow us to build upon the momentum of our excellent start, concluded Ettinger.
DIVIDENDS
Effective February 15, 2010, the Company paid its 326th consecutive quarterly dividend, at the annual rate of $.84.
Source: Hormel Foods Corp.
