August 24, 2012

Hormel maintains outlook despite high grain costs

Despite pressure from higher grain costs, Hormel Foods Corp stood by its full-year earnings outlook on Thursday (Aug 23).

The company also reported a higher quarterly profit that met Wall Street estimates as it benefited from gains across its businesses, which include Spam canned ham, Hormel meats and Jennie-O turkeys.

The worst drought in more than half a century in the US Midwest has scorched corn and soy crops while driving up prices of wheat and other grains. This has fuelled a spike in corn costs that is pressuring livestock producers by making feed more expensive.

Although higher costs will be a challenge, Hormel said, it expects continued sales and earnings growth this year because of its balanced business model.

It said it still expected a full-year profit of US$1.79-1.89 per share. Analysts on average are expecting US$1.85, according to Thomson Reuters I/B/E/S.

Hormel's earnings rose to US$111.2 million, or US$0.41 per share, in the third quarter ended on July 29 from US$98.5 million, or US$0.36 per share, a year earlier. Net sales rose 5% to US$2 billion, in line with Wall Street estimates.

The grocery products segment, which reported a 32% jump in operating profit, benefited from strong sales of Spam. The company's shares were up 0.9% at US$28.68 in early trading.