Hormel income advances 13%

by Meat&Poultry Staff
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AUSTIN, Minn. – Net income at Hormel Foods Corp. rose to $132.6 million, or 49 cents per diluted share, for the fourth quarter of fiscal 2012. This compares to $117.3 million or 43 cents per diluted EPS in the year-ago period. This represents a 13 percent increase in net income and a 14 percent increase in diluted EPS, according to the company.

“We achieved solid results in the quarter with earnings per share and sales up 14 percent and 3 percent, respectively. We are pleased to have generated both segment profit and sales increases in four out of five segments. We continue to enjoy sales and volume growth in many of our value-added franchises, demonstrating that our growth strategies are working,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

"In looking at the full year, we finished in the upper half of our guidance range. We delivered sales growth of 4 percent, ending the year at a record $8.2 billion, with all five segments registering increases. We also grew earnings per share by 7 percent, finishing at record earnings of $1.86 per share. We enjoyed another strong performance by our Jennie-O Turkey Store and International teams. Our Grocery Products and Specialty Foods segments also generated nice profit increases for the year. We enhanced our support of our key Hormel and Jennie-O Turkey Store brands in fiscal 2012 with effective advertising campaigns, and ran a new advertising campaign celebrating the 75th anniversary of our iconic SPAM brand. Finally, we met our goal of $2 billion in sales of new products by 2012," Ettinger said.

"This morning we announced an $.08 per share increase to the annual dividend (or 13 percent), making the new dividend $.68 per share. This marks the 47th consecutive year in which we have increased our dividend, and provides further evidence of our intention to deliver superior total returns to our shareholders," he added.

Segment highlights included:

• Grocery Products accounted for 16 percent of net sales and 26 percent of total segment operating profit, according to the company. The segment profit increased 22 percent on strong sales of SPAM products and the portfolio of products within the MegaMex Foods joint venture. Sales for the quarter climbed 21 percent, with contributions by Spam, MegaMex and Hormel chili.

• Refrigerated Foods slipped 12 percent, the company said. The segment accounted for 49 percent of net sales and 30 percent of total segment operating profit. Hormel said strong results in the company's value-added businesses did not fully offset lower pork operating margins and losses in Hormel's live hog operations. Sales for the quarter declined 3 percent on lower commodity meat prices. Hormel pepperoni and party trays in the Meat Products group and Hormel Natural Choice deli meats in the Foodservice group led growth in value-added products, according to the company.

• Jennie-O Turkey Store had a solid quarter with profits up 5 percent. Jennie-O accounted for 20 percent of net sales and 26 percent of total segment operating profit. Continued sales growth of value-added products and an improved product mix offset higher feed costs during the quarter, the company said. Sales for the quarter increased 5 percent, led by sales of Jennie-O Turkey Store fresh tray pack, turkey bacon and turkey burgers.

• Specialty Foods accounted for 11 percent of net sales and 12 percent of total segment operating profit. Operating profits for the segment advanced 8 percent on a 7 percent increase in sales, according to Hormel. Higher sales of private label canned meats contributed to the improved results.

• Profits in the All Other segment, which consists primarily of Hormel Foods International, gained 24 percent, while sales grew 1 percent. The segment accounted for 4 percent of net sales and 6 percent of total segment operating profit. The company attributed the gains to strong export sales to Canada and improved margins in Spam products.

For the year ended Oct. 28, 2012, net earnings climbed 5 percent to $500.1 million compared to net earnings of $474.2 million last year. Diluted net EPS was $1.86, up 7 percent from diluted net EPS of $1.74 in 2011. Sales for the year ended Oct. 28, 2012, totaled $8.2 billion, up 4 percent from last year.
Ettinger said the company expects earnings growth in fiscal 2013.

“In particular, we are looking for our Refrigerated Foods, Grocery Products, Specialty Foods and All Other (International) segments to drive profit growth in fiscal 2013, as our Jennie-O Turkey Store segment goes up against higher grain costs and historically high results,” he said. “We plan on making additional cuts to both our turkey and pork harvest levels during fiscal 2013, to reduce our exposure to volatile commodity markets. Taking all of the relevant factors into account, we are setting our 2013 guidance range at $1.90 to $2.00 per share.”

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