AUSTIN, Minn. – Hormel Foods Corp. reported results of its fiscal year 2015 third quarter ended July 26, highlighted by increased net earnings of $146.938 million compared to $137.975 million during the same 13 week period this past year. But net sales slipped 4 percent to $2.188 billion versus $2.284 billion for the same quarter last year.
Jeffrey Ettinger, Hormel’s chairman of the board, president and CEO, said in a conference call that sales were lower partly because of turkey supply shortages in Hormel’s Jennie-O Turkey Store segment and price deflation in the pork markets, primarily impacting sales within the company’s Refrigerated Foods and International segments.
“Jennie-O Turkey Store segment profit decreased 45 percent and sales decreased 12,” Ettinger said. “Results were impacted by high pathogen avian influenza, as flocks lost earlier this year created large volume shortfalls in operations and sales. We have now repopulated approximately two-thirds of the farms’ previously impacted and we expect to complete the repopulation process during the fourth quarter.”
While Hormel has been able to purchase some turkey meat from other suppliers to partially offset flock losses, Jennie-O Turkey Store sales are estimated to be 15 percent lower in sales in the fourth quarter versus last year.
|Jeffrey M. Ettinger, chairman, president and CEO of Hormel Foods|
“Our team continues to work closely with government agencies and other organizations as they study this virus and work to control future outbreaks,” Ettinger noted.
Quarterly revenues were also lower due to declining pork markets, which hindered Hormel’s Refrigerated Foods and International segments.
“To illustrate the dramatic change in pork markets, the average USDA pork cutoff price in July of 2014 was $133 compared to $83 in July of 2015, almost a $40 decrease,” Ettinger said. “While across the company our team is generally focused on our goal of 5 percent top line growth, in this particular market scenario, volume growth may be the more appropriate metric by which to gauge results.
Overall, Ettinger noted that 2015 “is shaping up to be an excellent year in terms of earnings growth for the company.”
“We would expect to deliver a 15 percent to 18 percent earnings increase over our record performance in fiscal 2014,” he added. “Our balanced business model has again allowed us to limit volatility in a challenging supply situation, while our experienced team has demonstrated their ability to navigate changing market conditions and continue to drive growth.”