February 24, 2012

Hormel Foods Corp. reported Thursday (Feb 23) its fiscal first-quarter profit fell 14% as it was squeezed by high pork prices and sales volumes fell 2%.

Hormel, which makes Spam, deli meats and other food products, earned US$128.4 million, or US$0.48 per share, for the quarter that ended January 29. That was down from US$148.8 million, or US$0.55 per share, during the quarter ending January 30 last year.

Revenue rose 6% to US$2.04 billion from US$1.92 billion despite the decline in sales volumes. Hormel has been raising prices to offset higher costs. The cost of making its foods rose 10% in the quarter to US$1.7 billion.

The company's quarterly net income and revenue both matched the expectations of analysts surveyed by FactSet.

More than half of Hormel's revenue comes from its refrigerated foods segment, which includes pepperoni, Natural Choice deli meats, and Country Crock side dishes like mashed potatoes and macaroni and cheese. Profit in that division dropped 44%, despite a 7% jump in revenue, because its pork products weren't as profitable. Hormel said in November that the price it's paying for pork has been high.

Costs for raw materials also hurt other units. Operating profit in the company's grocery division, whose products include Spam, chilli and salsa, fell 9%. Customers also bought fewer products.

Operating profit rose 4% in its Jennie-O Turkey Store unit, which makes up 19% of Hormel revenue. The company predicted "challenging" conditions for this year, although it expects its profitability on pork products to improve.

It repeated a profit outlook of US$1.79 to US$1.89 per share for the year, which ends in October. Analysts have been expecting the Austin, Minn., company to earn US$1.82 per share. Hormel shares closed at US$29.04 on Wednesday. They weren't active in premarket trading.