SPARKS, Md., Sept. 30, 2016 /PRNewswire/ -- McCormick & Company, Incorporated, a global leader in flavor, reported financial results for the third quarter ended August 31, 2016 and provided its latest financial outlook for fiscal year 2016.
- Sales rose 3% in the third quarter from the year-ago period. In constant currency, the company grew sales 6%, with strong results in both the consumer and industrial segments.
- McCormick increased gross profit margin to 41.6% from 39.8% in the third quarter of 2015. Operating income was$168 million in the third quarter compared to $139 million in the year-ago period. Adjusted operating income was$172 million, a 12% increase from $154 million in the third quarter of 2015.
- Earnings per share increased to $1.00 from $0.76 in the third quarter of 2015, mainly due to the increase in operating income and a favorable tax rate. Adjusted earnings per share rose 21% to $1.03 from $0.85 in the third quarter of 2015.
- For fiscal year 2016, based on its year-to-date performance and growth momentum, McCormick continues to expect solid sales growth and raised its projection for earnings per share.
President & CEO's Remarks
Lawrence E. Kurzius, President and CEO, stated, "Our strong third quarter financial results demonstrate the effective execution of our strategy. We are driving both sales growth and significant productivity improvements, and expect 2016 to be a record year for McCormick. The efforts and engagement of employees throughout the company are driving this performance.
"Consumer demand for healthy and high quality flavors continues to grow in markets around the world. In both our consumer and industrial segments, we are meeting this demand with a broad portfolio of on-trend products in our base business, innovative new products and through acquisitions. All of these factors contributed to our third quarter sales increase of 3%, which was 6% in constant currency, and we achieved particularly strong growth in our consumer business in the U.S. and inChina. We are balancing these strategies to grow sales with our actions to improve productivity and lower costs. Led by our Comprehensive Continuous Improvement (CCI) program, we expect to achieve cost savings of $100 million to $110 million in 2016. We are investing a portion of these savings in brand marketing and other growth initiatives and also driving greater profitability for our business, as demonstrated by the strong increase in third quarter operating income."
Third Quarter 2016 Results
McCormick reported a 3% sales increase in the third quarter from the year-ago period, which included an unfavorable impact of 3% from foreign currency exchange rates. Acquisitions added 2% to the sales increase, including the incremental impact of Stubbs, purchased in August 2015, and Gourmet Garden, purchased in April 2016. The remaining sales growth of 4% was driven by product innovation, brand marketing support and expanded distribution, as well as pricing actions to offset an increase in material costs. Each of the company's segments, consumer and industrial, is making progress with these growth strategies in 2016 and contributed to this third quarter sales increase. In constant currency, the company grew sales 6%.
Operating income was $168 million in the third quarter compared to $139 million in the year-ago period. The company recorded$4 million of special charges in the third quarter of 2016 related to organization and streamlining actions, and in the third quarter of 2015 recorded $15 million of special charges. In the third quarter of 2016 compared to the year-ago period, the favorable impact of higher sales and cost savings more than offset higher material costs and a $3 million increase in brand marketing. Excluding special charges, adjusted operating income was $172 million compared to $154 million of adjusted operating income in the year-ago period. In constant currency, adjusted operating income rose 15%.
Earnings per share was $1.00 in the third quarter compared to $0.76 in the year-ago period. Special charges lowered earnings per share by $0.03 and $0.09 in the third quarter of 2016 and 2015, respectively. In the third quarter of 2016 compared to the year-ago period, the increase in earnings per share was driven by higher operating income, including the impact of special charges, as well as a favorable tax rate and lower shares outstanding. Excluding the impact of special charges, adjusted earnings per share was $1.03 in the third quarter of 2016 compared to $0.85 in the year-ago period.
The company continues to generate strong cash flow and year-to-date net cash provided by operating activities through the third quarter of 2016 was $322 million compared to $317 million in the first three quarters of 2015. Full report.
