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Hormel Foods Reports Q3 Results

by 5m Editor
22 August 2008, at 9:08am

US - Hormel Foods Corporation has reported its performance for the fiscal 2008 third quarter. Whilst overall sales for the group are well up on last year, Jennie-O Turkey Store has a much reduced operating profit despite higher sales.

Hormel Foods Corporation, based in Austin, Minnesota, announced its third quarter (Q3) 2008 results, with highlights that include:

Diluted EPS of $.38, down 7 per cent from $.41 per share in 2007. Dollar sales of $1.68 billion increased 10 per cent from 2007 Volume up 7 per cent compared to last year Operating profit down 2 per cent from 2007 Grocery Products operating profit up 11 per cent; volume up 10 per cent; dollar sales up 10 per cent Refrigerated Foods operating profit down 1 per cent; volume up 4 per cent (flat excluding acquisitions); dollar sales up 8 percent (up 4 per cent excluding acquisitions) Jennie-O Turkey Store operating profit down 61 per cent; volume up 7 per cent; dollar sales up 11 per cent Specialty Foods operating profit up 20 per cent; volume up 10 per cent; dollar sales up 14 per cent All Other operating profit up 19 per cent; volume up 24 per cent; dollar sales up 33 per cent.

The company reported fiscal 2008 third quarter net earnings of $51.9 million, down 9 per cent from earnings of $57.4 million a year earlier. Diluted earnings per share for the quarter were $0.38 this year compared to $0.41 per share last year. Sales totaled $1.68 billion, up from $1.52 billion in fiscal 2007. For the nine months ended July 27, 2008, net earnings were $217.7 million, or $1.58 per diluted share (up 10 per cent), compared to $200.7 million a year ago or $1.44 per diluted share. Sales totaled $4.9 billion, up 8 per cent, from $4.5 billion in the same period last year.

Commentary

"We continue to generate strong top-line growth in both dollar sales and volume across all five of our operating segments," said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

"As we previously announced, the higher feed input and fuel costs at our Jennie-O Turkey Store segment pressured profitability and contributed to the year over year decline in the company’s third quarter results.

"Relatively flat results in our Refrigerated Foods segment and a decline in investment income also presented unanticipated challenges during the quarter. In our Refrigerated Foods segment, strong fresh pork margins and pricing taken by our Meat Products and Foodservice Divisions were insufficient to overcome increased costs experienced by those divisions.

"We were encouraged by the strong top-line and bottom-line growth by our Grocery Products, Specialty Foods and All Other segments. Our Grocery Products and All Other segments maintained the strong momentum they had during the first half of the year, and our Specialty Foods segment rebounded nicely under difficult operating circumstances," Mr Ettinger said.

Operating Segments: Jennie-O Turkey Store

This group accounted for 19 per cent of net sales and 8 per cent of total segment operating profit. Operating profit declined 61 per cent in the Jennie-O Turkey Store segment in the quarter despite an 11 per cent increase in sales. While the Jennie-O Turkey Store team continued to implement price increases, these increases were not adequate to offset the approximately $53 million increase in feed and fuel input costs incurred during the quarter. An oversupply of turkey breast meat in the market also kept pricing of commodity breast meat at a low level, exacerbating the cost-price differential. Demand for retail value-added products such as Jennie-O Turkey Store turkey burgers and tray pack products continues to be strong.

Outlook

"As stated in our pre-announcement on August 8, we expect to see continued earnings pressure at Jennie-O Turkey Store from higher input costs, as the birds fed with higher grain prices make their way through the system. As stated previously, we are adjusting our full year guidance to $2.22-$2.28 per share, which is above our prior year results of $2.17 per share last year ($2.14 excluding the sale of assets in the fourth quarter). We continue to focus on our long-term objectives to grow the business through product innovation, increasing brand strength and adding value to our products," Mr Ettinger said.

Further Reading

- You can view the full report by clicking here.

5m Editor