Hormel 2Q net income, sales up substantially

by Bryan Salvage
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AUSTIN, Minn. – Strong pork margins, stronger commodity meat prices, improved efficiencies and core product strength combined helped Hormel Foods Corporation’s fiscal year 2011 second quarter net earnings to total $109.6 million, up 20 percent from adjusted net earnings of $91.3 million one year earlier. Net earnings for the six months ended May 1 totaled $258.4 million, up 28 percent from adjusted net earnings of $202.5 million the same period last year.

Sales for the quarter were $2 billion, up 15 percent from fiscal 2010. Sales for the six months ended May 1 totaled $3.9 billion, up 13 percent from the same period last year.

“Earnings growth was led by our Refrigerated Foods and Jennie-O Turkey Store segments, both of which had a strong quarter,” said Jeffrey Ettinger, chairman, president and CEO. “We are also gratified to attain sales growth in all five of our segments. Our Refrigerated Foods segment generated excellent results, benefitting from strong pork operating margins, and our Jennie-O Turkey Store segment delivered another outstanding quarter, aided by stronger commodity meat prices and improved efficiencies.”

Hormel’s Grocery Products segment operating profit fell 9 percent from adjusted segment operating profit one year ago, due to higher input costs. Net sales exceeded last year by 1 percent. Strong results from core products such as the SPAM family of products, Hormel bacon toppings, Hormel Mary Kitchen hash and Dinty Moore stew offset soft sales of the company’s microwave products and imported canned meats. Sales for the MegaMex Foods business continued to increase.

The Refrigerated Foods segment surpassed last year’s profitability by 27 percent, due primarily to higher pork operating margins. Net sales for the quarter increased 16 percent, with strong contributions from products such as Hormel party trays, Hormel Natural Choice deli meats and Hormel Cure 81 premium hams. Positive contributions from the new Hormel Country Crock business were also reflected in the results.

Jennie-O Turkey Store segment operating profit increased 45 percent from one year ago. Stronger commodity meat markets and improved efficiencies contributed to the good results. Net sales for the quarter rose 25 percent, and sales of its value-added products rose in all three trade channels.

The Specialty Foods segment operating profit declined 11 percent, due to higher raw material costs. Net sales grew 4 percent, as higher sales of private-label canned meats, sugar and blended items offset softer nutritional jar sales.

Segment profit of the All Other segment, which consists primarily of Hormel Foods International, increased 104 percent, and net sales rose by 45 percent, driven mostly by stronger exports of fresh pork and the SPAM family of products.

Although Hormel anticipates seeing higher input costs during the remainder of the year, Ettinger added, “Given our strong results in the second quarter, we are raising our full year guidance range to $1.67 to $1.73 per share from $1.62 to $1.68 per share.”
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