February 19, 2010

Hormel Foods profit jumps on strong canned meat, Mexican sales

Hormel Foods Corp. posted a surprisingly strong 37% rise in fiscal first-quarter profit on Thursday (Feb 18), getting a boost from sales of its canned meat and Mexican foods, and raised its full-year outlook.

The company also said it benefited from favourable hog costs in the quarter. However, higher hog costs that were anticipated in the second half of the year have come sooner than expected, and that trend is expected to continue as the weather warms, Hormel chief executive officer Jeffrey Ettinger said.

The company added that while sales of its private label canned meats rose, those increases did not come at the expense of its branded items.

Hormel reported net earnings in the quarter ended January 24 of US$111.2 million, or 82 cents a share, up from US$81.4 million, or 60 cents a share, a year earlier.

Meanwhile, sales in the quarter rose 2.3% to US$1.73 billion from a year ago.

Among Hormel's business units, Grocery Products revenue rose 8% on strength in core canned meat products and the new MegaMex Foods line. Lower raw materials costs helped propel a 37% rise in operating profit in the segment, the company said. It also noted that sales stabilised in its Hormel Compleats microwave meals line.

Revenue from Refrigerated Foods, which makes up more than half of total company sales, fell 1% due to softer demand for ham, bacon and commodity pork and continued weak foodservice demand. However, the segment saw a 53% jump in operating profit, helped by favorable hog costs.

Revenue in the Jennie-O Turkey Store business increased 5% on increased sales of whole birds and higher dark meat prices due to decreased supply and good export demand. Specialty foods revenue also rose 5%, driven in part by sales of private label products.

International sales benefited from improved Spam sales overseas that offset weaker exports of fresh pork products.

Although it foresees higher hog costs in the year ahead, Hormel expects to build on its strong first-quarter momentum and raised its full-year profit forecast a range of US$2.68 to US$2.78 a share from US$2.63 to US$2.73 previously.