Hormel to close California plant

by Erica Shaffer
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AUSTIN, Minn. – Hormel Foods Corp. plant in Stockton, Calif., will close at the end of February 2015, the company announced Nov. 25. The plant manufactures Dinty Moore stew and Hormel Chili. Production will shift to other facilities.

Jeffrey Ettinger, president and CEO, said employees at the plant were notified of the closure late yesterday.

“This was a difficult decision but a necessary step given available capacity in other more modern dry grocery facilities in the company,” Ettinger said during an earnings conference call. Ettinger added that Hormel also is considering an exit from operations in Vietnam in early fiscal 2015. The company's business in Vietnam has been part of a larger joint venture in the region.

“This business, which includes hog production, feed mills and a processed meats facility, all located in Vietnam, has not delivered the results we expect from our international investment,” Ettinger said.

“As a result of the closure of the Stockton facility and the potential exit from the Vietnam business, we expect nonrecurring expenses of $0.04 to $0.06 per share to impact our profits in the first half of fiscal 2015," he added. “We are providing details about these anticipated nonrecurring items to allow better visibility of our long-term operating performance expectation.”

The announcements came as Hormel reported disappointing results in its grocery products and specialty foods segments. Grocery products segment profits declined 21 percent, while sales slipped 3 percent on record high prices for meat and soft sales, according to Hormel. Operating profits in the specialty foods segment dropped 14 percent on charges related to Hormel's acquisition of CytoSport.

Ettinger said Hormel has struggled in traditional canned-meat items such as Dinty Moore and Hormel Chili, describing the company's challenges as "an up and down experience" with microwave meals.

“We are going to market with a little bit different tactics within that category in terms of tiered pricing and new offerings, and we will see if that works,” he added. “That's our game plan going into 2015.”

As for the Stockton plant, Ettinger said the age of the facility was a factor in the decision to cease operations.

“We really had to make a determination: do we pour more money into that facility, or could we utilize the capacities we have available in more modern grocery facilities elsewhere in the US? And so we made that difficult decision for that reason,” he said.
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