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Jenny-O Turkey Hits Hormel Profits

27 May 2013

US - US meat and food processing giant Hormel Foods has seen second quarter operating profits fall by two per cent despite a rise in sales of seven per cent to $2.2 billion and a rise on volume of four per cent.

The company was hit by a sharp drop in profits at Jennie-O Turkey.

The company has reported diluted EPS of $0.46, down by four per cent.

Grocery Products operating profit was up 10 per cent and volume was up by 47 per cent.

Dollar sales were up by 49 per cent.

Non-recurring costs related to the SKIPPY® peanut butter acquisition were approximately $9 million.

Refrigerated Foods operating profit was up by three per cent although volume was down by four per cent and dollar sales were down by two per cent.

Jennie-O Turkey Store operating profit was down by 26 per cent, with volume down four per cent and dollar sales down two per cent

However, Specialty Foods operating profit was up by 24 per cent with volume up four per cent and dollar sales up seven per cent

International and other operating profit was up by 21 per cent with volume up 11 per cent and dollar sales up 21 per cent.

The company reported fiscal 2013 second quarter net earnings of $125.5 million, down two per cent from net earnings of $127.9 million a year earlier.

For the six months ended 28 April 2013, net earnings were $255.2 million, essentially even with net earnings of $256.3 million for the same period last year.

Diluted net earnings per share for the six months ended April 28, 2013 were $.95, equal to diluted net earnings per share of $.95 last year.

Sales for the quarter were $2.2 billion, up 7 percent from fiscal 2012. For the six months ended April 28, 2013, sales totalled $4.3 billion, up 5 percent from the same period last year.

“We were pleased to deliver sales and volume growth, despite harvest reductions in both our Refrigerated Foods and Jennie-O Turkey Store operations. In terms of operating profits, improved results by our Specialty Foods, Grocery Products, and International & Other segments did not fully offset weaker results by our Jennie-O Turkey Store segment,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

“Our earnings were also impacted by non-recurring costs related to our acquisition of the SKIPPY® peanut butter business in the amount of $9 million. Overall, earnings per share of $0.46 during the quarter keep us on track to maintain our full year guidance.”

“Our Specialty Foods team delivered impressive earnings on significant sales growth. The Grocery Products segment turned in a strong sales quarter, led by HERDEZ® and CHI-CHI’S® Mexican products, HORMEL® COMPLEATS® microwave meals, and DINTY MOORE® stew. Our International team achieved excellent results led by higher sales of the SPAM® family of products,” Mr Ettinger added.

“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. We are also excited about the launch of our new HORMEL® REV® snack wraps by our Refrigerated Foods team, which are arriving on-shelf at retailers nationally.

“The integration of the domestic SKIPPY® peanut butter business into our Grocery Products segment was completed during the quarter, ahead of schedule. The closing of the acquisition of the China business is on track to be completed by the end of the fiscal year,” Mr Ettinger said.

He added: “We are pleased with the growth being demonstrated by our Grocery Products and International & Other segments, and anticipate continued success for those segments going forward.

“In addition to continued organic growth, those two segments’ results will benefit from the SKIPPY® peanut butter acquisition. Our Specialty Foods segment will be challenged by the loss of the SPLENDA® sweetener sales in the back half of the year. Our Refrigerated Foods segment is presently facing weaker pork operating margins and challenges in live hog production operations, though we expect those factors to improve in the back half of the year.

“We expect results in our Jennie-O Turkey Store segment will turn the corner as pressures from higher commodity grain prices and weaker turkey commodity meat prices begin to moderate in the back half of the year. Taking all of these factors into account, we are maintaining our full-year guidance of $1.93 to $2.03 per share,” concluded Mr Ettinger.

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