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Hormel’s biggest year ever: Profit of $526 million, $8.75 billion in sales

Published 10:24am Tuesday, November 26, 2013

Skippy, Mexican brand lead as company reports record profit, sales

Hormel Foods’ acquisition of Skippy already appears to be paying dividends — literally.

ah.01.26Led by the peanut butter brand — which Hormel bought in January from Unilever for $700 million — the Austin-based company reported Tuesday another record-breaking fiscal year, with $526.2 million in profit and $8.75 billion in total sales, both all-time bests.

Profit, which was up for the fifth-consecutive year, was $1.95 per share and increased 5 percent from $500.1 million last year, or $1.86 per share. That’s almost double 2008’s profit, when the Austin-based company reported $285.5 million.

Sales were up 6 percent from $8.23 billion in 2012, or an increase of about $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 ongoing 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 percent), with its grocery and international divisions leading the way. The grocery division — which accounts for 18 percent of net sales but 26 percent of Hormel’s operating profit — reported that its profit was up 18 percent and volume was up 29 percent 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 percent of sales, operating profit was up 43 percent, as Skippy was the breadwinner again.

Refrigerated foods, which accounts for 48 percent of net sales, recorded a profit increase of 2 percent.

The specialty foods division’s profit was up 7 percent for the year, but down 34 percent 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 percent of net sales.

Strong quarter closes record year

Hormel also said Tuesday that its fiscal fourth-quarter net income rose 19 percent, benefiting from strong export sales of Spam and Skippy. Its performance beat analysts’ expectations.

The food company also boosted its annual dividend 18 percent to 80 cents per share from 68 cents per share.

Hormel earned $157.3 million, or 58 cents per share, for the period ended Oct. 27. That’s up from $132.6 million, or 49 cents per share, a year earlier.

Analysts polled by FactSet expected earnings of 54 cents per share.

Revenue rose 7 percent to $2.32 billion from $2.17 billion. Wall Street expected $2.31 billion in revenue.

The biggest gain in the fourth quarter came from the international segment, with profit rising 82 percent due, again, to the strong export sales of Spam and Skippy products. Profit for the grocery products division increased 17 percent 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 percent, respectively.

On to 2014

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

“We expect to deliver continued sales and earnings growth in fiscal 2014,” said Ettinger, adding that he expects profit growth in all but the specialty foods division.

Ettinger said on a conference call Tuesday morning 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 20 cents per share. The dividend will be paid on Feb. 14, 2014 to shareholders of record on Jan. 22, 2014.

The company also is expected to announce tomorrow morning its profit sharing bonus for all employees who have been with the company for at least a year. In 2012, Hormel divvied a record $16.9 million in bonuses.

—The Associated Press contributed to this report.