November 27, 2013

 

 

Hormel reported another record-breaking fiscal year with US$526.2 million in profit and US$8.75 billion in total sales, both all-time bests.

 

The all-time high results were led by the peanut butter brand, Skippy, which Hormel bought in January from Unilever for US$700 million. Profit, which was up for the fifth-consecutive year, was US$1.95/share and increased 5% from US$500.1 million last year, or US$1.86/share. That's almost double 2008's profit, when Hormel reported US$285.5 million. Sales were up 6% from US$8.23 billion in 2012, or an increase of about US$500 million in sales.

 

"We achieved excellent results in the fourth quarter …" Hormel President and CEO Jeff Ettinger said in a news release. "We are pleased with our team's ability to drive earnings growth through our on-going efforts to improve operational efficiencies and focus on expanding our value-added franchises, providing strong momentum heading into fiscal 2014."

 

Hormel reported profit increases for four of its five divisions this year (Jennie-O was down 7%), with its grocery and international divisions leading the way. The grocery division - which accounts for 18% of net sales but 26% of Hormel's operating profit - reported that its profit was up 18% and volume was up 29% this year. However, excluding Skippy and the Don Miguel Mexican brand from the grocery division, volume was flat.

 

In the international division, which accounts for 5% of sales, operating profit was up 43%, as Skippy was the breadwinner again. Refrigerated foods, which accounts for 48% of net sales, recorded a profit increase of 2%.

 

The specialty foods division's profit was up 7% for the year, but down 34% for the fourth quarter, as it was hurt by the expiration of a deal allowing Diamond Crystal Brands to sell some sugar substitutes into foodservice trade channels. Specialty foods accounts for 9% of net sales.

 

Hormel also said that its fiscal fourth-quarter net income rose 19%, due to strong export sales of Spam and Skippy. Its performance beat analysts' expectations. The food company also boosted its annual dividend by 18% to US$0.80/share from US$0.68/share.

 

The company earned US$157.3 million, or US$0.58/share, for the period ended October 27. That's up from US$132.6 million, or US$0.49/share, a year earlier. Revenue rose 7% to US$2.32 billion from US$2.17 billion. Wall Street expected US$2.31 billion in revenue.

 

The biggest gain in the fourth quarter came from the international segment, with profit rising 82% due to the strong export sales of Spam and Skippy products. Profit for the grocery products division increased 17% led by Skippy. The unit also reported strong sales of its Hormel Compleats microwave meals, Hormel bacon toppings and the Herdez products within its MegaMex Foods joint venture. The refrigerated foods and Jennie-O Turkey Store units also posted profit increases, at 30% and 25%, respectively.

 

The company anticipates 2014 earnings between US$2.17 and US$2.27/share. Analysts predict earnings of US$2.25/share.

 

Ettinger said in a statement that Hormel should benefit from lower grain and turkey commodity costs, but that it may be somewhat offset by high beef input costs and hog supply uncertainty.

 

He said on a conference call that the company plans to accelerate growth with a strong advertising push, continuing its national campaign for its new Rev Wraps snack, marketing Spam and Skippy internationally, and refocusing on Jennie-O starting in January.

 

Hormel declared a quarterly dividend of US$0.20/share. The dividend will be paid on February 14, 2014 to shareholders of record on January 22, 2014.