Hormel Foods Corporation (NYSE: HRL) today reported its performance for
the fiscal 2008 second quarter.
HIGHLIGHTS
-
Diluted EPS of $.56, up 14 percent from $.49 per share in 2007
-
Dollar sales of $1.59 billion increased 6 percent from 2007 (up 4
percent excluding acquisitions)
-
Volume up 5 percent compared to last year (up 3 percent excluding
acquisitions)
-
Operating profit up 10 percent from 2007
-
Grocery Products operating profit up 6 percent; volume flat; dollar
sales up 4 percent
-
Refrigerated Foods operating profit up 26 percent; volume up 4 percent
(up 1 percent excluding acquisitions); dollar sales up 4 percent (up 1
percent excluding acquisitions)
-
Jennie-O Turkey Store operating profit down 16 percent; volume up 9
percent; dollar sales up 8 percent
-
Specialty Foods operating profit down 5 percent; volume up 5 percent;
dollar sales up 8 percent
-
All Other operating profit up 20 percent; volume up 7 percent; dollar
sales up 19 percent
The company reported fiscal 2008 second quarter net earnings of $77.6
million, up 14 percent from earnings of $68.0 million a year earlier.
Diluted earnings per share for the quarter were $.56 this year compared
to $.49 per share last year. Sales totaled $1.59 billion, up from $1.50
billion in fiscal 2007. For the six months ended April 27, 2008, net
earnings were $165.7 million, or $1.20 per diluted share (up 17
percent), compared to $143.3 million a year ago or $1.03 per diluted
share. Sales totaled $3.22 billion, up 7 percent, from $3.01 billion in
the same period last year.
COMMENTARY
“It was a solid quarter for Hormel Foods. We
were able to meet our company objectives for sales and earnings growth
in the second quarter amidst a challenging operating environment,”
said Jeffrey M. Ettinger, chairman of the board, president and chief
executive officer. “Our Refrigerated Foods
segment led the way, as lower pork input costs combined with increased
sales of value-added products provided a significant increase in
earnings. Our Grocery Products segment also delivered higher than
expected sales and earnings, aided by strong sales of the SPAM
family of products and continued growth of the HORMEL COMPLEATS
product line.”
“Jennie-O Turkey Store reported a significant
decline in earnings as a result of a continued run-up in grain and fuel
costs. The Specialty Foods segment also reported a decline in earnings,
as a result of increased input and fuel costs. Our International segment
had another excellent quarter, posting double-digit increases in dollar
sales and earnings, primarily attributable to strong export sales of the SPAM
family of products and fresh pork. Overall, our balanced model helped to
stabilize earnings for the company even when two of our segments
experienced a difficult operating environment.”
SEGMENT OPERATING HIGHLIGHTS –
SECOND QUARTER
Grocery Products (15% of Net Sales,
32% of Total Operating Profit)
The Grocery Products segment reported a 6 percent increase in operating
profit compared to last year. The SPAM family of products had
another strong quarter with higher sales and profits due to improved
promotional support, national media efforts and expanded distribution of SPAM
Singles. Sales of HORMEL COMPLEATS microwave meals, HORMEL chili
and DINTY MOORE stew also increased in the quarter. Sales of VALLEY
FRESH products were down due to competitive pressures. Sales of
ethnic products also declined due to lower volumes of CHI-CHI’S
sauces and the rationalization of low margin business.
Refrigerated Foods (52% of Net Sales,
43% of Total Operating Profit)
The Refrigerated Foods segment had a strong quarter with operating
profit up 26 percent compared to fiscal 2007. Lower hog input costs
compared to last year led to higher margins in both value-added products
and fresh pork. Sales and volumes also improved in key retail product
lines such as HORMEL NATURAL CHOICE deli meats and HORMEL refrigerated
entrees. Volumes in the Foodservice business unit were flat for the
quarter. We have been able to offset some lost volumes in the casual
dining segment by pursuing other channels. The acquisition of Burke
Corporation also positively contributed to the second quarter results.
Jennie-O Turkey Store (18% of Net
Sales, 9% of Total Operating Profit)
Operating profit declined 16 percent in the Jennie-O Turkey Store
segment in the quarter despite an 8 percent increase in sales.
Grain-related costs were $39 million higher compared to fiscal 2007. The
increase in corn prices during the second quarter added a new layer of
costs that were not fully recovered. Given the current market dynamics,
we will be reducing our poult placements in our grow-out facilities by
approximately 5%. We will also continue to pursue manufacturing
efficiencies, customer and product rationalization, and pricing to
improve profitability. Sales of value-added retail products continued to
grow during the quarter, led by fresh tray pack, turkey burgers and
marinated tenders. This helped offset softer sales of certain other
value-added retail products, including pan roasts and turkey franks.
Specialty Foods (12% of Net Sales, 12%
of Total Operating Profit)
The Specialty Foods segment reported operating profits down 5 percent
compared to fiscal 2007. Better results at the Century Foods
International business unit from higher sales of nutritional jar and
ready-to-drink products did not offset declines in the other business
units. Profits declined in the Specialty Products business unit due to
higher input costs and lower sales volumes of dry sausage. Diamond
Crystal Brands was adversely affected by higher input costs and lower
volumes.
All Other (3% of Net Sales, 4% of
Total Operating Profit)
The All Other segment, which includes the International business unit,
had another excellent quarter with operating profits up 20 percent.
Export sales and margins continued to be strong throughout the quarter,
particularly for the SPAM family of products and fresh pork.
Operating results in our China operations declined due to continued high
hog input costs and lower export volumes.
OUTLOOK
“We are reconfirming our fiscal 2008 guidance
range of $2.30-$2.40 per share. Although we hope to build on our solid
first half results, we anticipate further pressure from increasing grain
and energy costs. We also face some uncertainty regarding protein input
costs. The strength of our core businesses, the growth of our
value-added products and the ability of our people to adapt to changes
in the business environment should allow us to meet our goals,”
Ettinger said.
DIVIDENDS
Effective May 15, 2008, the Company paid its 319th
consecutive quarterly dividend. The annual rate is $.74.
CONFERENCE CALL
A conference call will be Webcast at 9:00 a.m. CT on Thursday, May 22,
2008. Access is available at www.hormelfoods.com.
If you do not have Internet access and want to listen to the call over
the phone, the dial in number is 800-218-0713. An audio replay is
available by calling 800-405-2236 and entering access code 11113993#.
The audio replay will be available beginning at 11:00 a.m. CT on
Thursday, May. 22, 2008, through 11:59 p.m. CT on Friday, June 6, 2008.
The Webcast replay will be available at 11:00 a.m. CT, Thursday, May 22,
2008, and archived for one year.
ABOUT HORMEL FOODS CORPORATION
Hormel Foods Corporation, based in Austin, Minn., is a multinational
manufacturer and marketer of consumer-branded food and meat products,
many of which are among the best known and trusted in the food industry.
The company leverages its extensive expertise, innovation and high
competencies in pork and turkey processing and marketing to bring
quality, value-added brands to the global marketplace. For each of the
past nine years, Hormel Foods has been named one of “The
Best Big Companies in America” by Forbes
magazine. The company enjoys a strong reputation among consumers, retail
grocers and foodservice customers for products highly regarded for
quality, taste, nutrition, convenience and value. For more information,
visit www.hormelfoods.com.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking information based on
management’s current views and assumptions.
Actual events may differ materially. Please refer to the cautionary
statement regarding Forward-Looking Statements and risk factors that
appear on pages 24-29 in the Company’s 10Q
for the fiscal quarter ended January 27, 2008, which can be accessed at www.hormelfoods.com
under “Investors-SEC Filings.”
Segment Data
Fiscal 2008 Second Quarter Segment Operating Results (in Thousands)
