September 13, 2011

Hormel attests to building brands and value-adding 

Hormel attests to building brands and value-adding on a long-term basis when addressing consumer expectations in a challenging economic environment, says Jeffrey Ettinger, chairman, president and CEO at the Barclays Capital Back to School Consumer Conference.

"Our third quarter was another positive quarter for the company, generating a 10% increase in net sales and a 13% increase in earnings per share, both of which were record numbers for the company," he said. "Tonnage during the third quarter flattened out a bit after several quarters in a row of more substantial growth, and it's something we're going to keep an eye on."

Two of Hormel's business segments, Refrigerated Foods and Jennie-O Turkey Store, had significant supply-chain implications, and the total amount of hogs or turkeys processed will impact tonnage. "For example, in the Jennie-O Turkey Store segment, total sales tonnage was down during the quarter, but value-added tonnage was up because we had a production cut that we had implemented the year prior that rolled through, keeping moderation in terms of the supplies we're seeing, but we grew that important value-added business," he said.

All five Hormel segments again had sales dollar increases for the quarter, Ettinger said. "That's the sixth-consecutive quarter all five segments have increased," he added. "On a segment profit basis, the leaders for the company during Q3 were Grocery Products with a 19% increase, Jennie-O Turkey Store with a 14% increase, and all other segments are basically our international segment. They had a very nice quarter with a very significant 60% plus increase."

Hormel ends its fiscal year at the end of October. "Sales for the year are up 12%, on pace to again be in that high US$7 billion range on tonnage increase for the year of 4% and net earnings per share through three quarters at US$1.31, or a 22% increase," Ettinger said. "Once again, sales have been up in all five segments.

"We talk a lot at Hormel Foods about our balanced business model, the fact that we're in both the protein and the packaged food business...the fact that we have significant presence in branded resale items, but also nearly US$2 billion of our sales in the foodservice segment - even the fact from a balance standpoint that we manage our company conservatively from a financial standpoint," he added. "But we push for innovation within our company."

One key area of balance is the balanced performance between Hormel's business segments. "They have somewhat different input challenges and macro-market opportunities, but they're all looking to grow their value-added items," he said. "Historically, we have seen a pattern of certain pistons firing in certain businesses at a given time, and the net of it is that we've been able to accelerate and move our company forward."