May 28, 2013

Hormel Foods' net income drops by 2% in Q2 2013

Hurt by weak results in its Jennie-O Turkey Store business and charges related to its acquisition of Skippy peanut butter, Hormel Foods' second-quarter net income fell by 2%.

Jennie-O operating profit slid 26% on a 4% decline in volume. "Although the team at Jennie-O Turkey Store was confronted with higher grain costs and lower commodity turkey meat prices, we are encouraged by the continued growth in sales of our value-added turkey products," Hormel Chief Executive Jeffrey Ettinger said.

Ettinger predicted Jennie-O results would "turn the corner" as pressure from higher grain prices and weaker commodity meat prices begins to moderate in the second half of the year.

The company maintained its full-year earnings forecast for earnings of US$1.93 to US$2.03 a share, noting its grocery products saw strong sales in the quarter, led by Hormel Compleats microwave meals, Dinty Moore stew, Mary Kitchen hash and Herdez and Chi-Chi's Mexican products. Spam also boosted international sales.

Hormel said it earned US$125.5 million, or US$0.46/share, in the quarter ended April 28, down from US$127.9 million, or US$0.48/share, a year earlier. The company recorded about US$9 million in one-time costs in the latest quarter for Skippy, which it bought from Unilever in January.

Net sales increased 7% to US$2.15 billion. Net sales in the refrigerated foods segment fell 2% to US$1.01 billion due to increased grain costs in the company's live production operations. Retail sales of Hormel party trays, Hormel convenience bacon and Lloyd's ribs rose, as did sales of Hormel Fire Braised meats and Hormel Pecanwood bacon to foodservice customers.