Hormel earnings down 8 percent

Published 9:15 am Friday, February 20, 2009

Hormel Foods’ first quarter results show the company is not immune to the slumping economy, with net earnings down 8 percent from the year before and most segments taking a hit.

The company today reported a first quarter net earnings of $81.4 million, down from $88.2 million. Diluted earnings per share for the quarter were 60 cents this year compared to 64 cents per share last year. Sales totaled $1.69 million, up from $1.62 billion in fiscal 2008.

However, sluggish first quarter results were anticipated, and Hormel is still expected to meet its earnings guidance goal as well as its goal of $2 billion in product sales by 2012.

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“Overall we had predicted a down quarter,” said Jeffrey Ettinger, chairman of the board, president and chief executive officer, this morning during a conference call. “The results so far are keeping with our expectations.”

Ettinger pointed to Hormel’s “strong portfolio of leading brands” and “strong development program for innovation” as advantages in this economic climate.

“As anticipated, we started out the year with weaker operating results, resulting in a decline of 4 cents per share from our record earnings of a year ago, “Ettinger said. “Our Grocery Products segment had a solid quarter, led by strong canned meat sales. Our Jennie-O Turkey Store segment is doing a good job of addressing the difficult market conditions, including very weak commodity meat markets and higher input costs that continue to work their way through the system.”

Jennie-O’s operating profit was down 16 percent in the first quarter, which is attributed to higher grain costs as well as a significantly lower commodity market for breast meat.

Refrigerated Foods suffered the biggest decrease, down 27 percent for the quarter, primarily attributable to the significant decline in the spread between hog costs and primal values.

The Meat Products business unit performed well for the quarter, led by strong double-digit results for Hormel Cure 81 hams, Di Lusso Deli Co. products, Hormel Black Label bacon and Hormel Natural Choice sandwich meats, Ettinger said today.

Foodservice sales declined during the quarter, reflecting the decision by consumers to eat more meals at home and the reduction in both business and personal travel.

The Grocery Products segment performed well in the first quarter, with a 6 percent sales increase and a 9 percent increase in operating profit for the quarter compared to last year. Strong sales of canned meat items such as Spam products, Dinty Moore stews and Hormel chili had double-digit sales to more than offset softer sales of the Compleats microwavable meals, a trend that shows consumers moving away from microwavable meals, Ettinger said.

The Specialty Foods group reported a decrease in operating profit of 16 percent. Sales of ready-to-drink and nutritional powders at Century Foods softened due to the difficult economic conditions. Hormel Specialty Products also suffered from reduced contract packaging sales of microwave products. On the other hand, Diamond Crystal Brands experienced solid growth during the quarter, led by improved performance of their nutritional and liquid-portion healthcare products.

The All Other segment, which includes Hormel Foods International, experienced a 9 percent decrease in operating profit for the quarter. Strong sales from exports of fresh pork and Spam products were unable to fully offset the negative impact of the strengthening U.S. dollar and weaker results experienced by joint ventures.

Effective Feb. 15, the company paid its 322nd consecutive quarterly dividend. The annual rate is 76 cents.