August 11, 2008
High feed and fuel prices push Hormel to lower outlook
US meat company Hormel Foods Corporation on Friday (August 8) said it may fall short of targets for its third quarter and full-year earnings this year despite weathering rising commodity prices with strong earnings.


The Austin, Minnesota-based meat and food manufacturer cited rising feed and fuel costs in its Jennie-O Turkey Store division for the shortfall. While corn, which hit record highs of nearly $8 a bushel in late June, has fallen dramatically in recent weeks -- to $5.18 on Friday -- prices are still significantly higher than a year ago.


Hormel stock fell more than 5 percent, closing at $35.64.


Earnings for the quarter are expected to be between 37 and 39 cents per share, Hormel said while analysts had been expecting 45 cents. A year ago, the company earned 41 cents per share.


While feed and fuel costs have been rising all year, in previous quarters Hormel was able to offset that with price increases and higher sales of products such as Spam.


Lower pork costs also helped shore up profit.


But in a brief statement last week, the company said price increases in the Jennie-O segment haven't offset higher costs, and that an oversupply of turkey breast meat exacerbated the problem, keeping prices down.


Earnings pressure will continue in the fourth quarter, as the birds that were fed with higher-priced grain make their way through the system, Hormel CEO Jeffrey Ettinger said.


The company, which still expects earnings to rise for the year, lowered its full-year forecast to between $2.22 and $2.28 per share, down from $2.30 to $2.40.


The company is set to release its full third-quarter results August 21.

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