AUSTIN, Minn.--(BUSINESS WIRE)--Hormel Foods Corporation reported record performance for the fiscal year 2016 second quarter.
All comparisons are to the second quarter of fiscal 2015. All earnings per share measures have been adjusted to reflect the two-for-one stock split distributed on February 9, 2016.
SUMMARY
- Record diluted earnings per share of $0.40, up 21 percent from $0.33 per share.
- Dollar sales of $2.3 billion, up 1 percent; volume down 1 percent.
- Grocery Products operating profit up 21 percent; volume down 1 percent; dollar sales up 1 percent.
- Refrigerated Foods operating profit up 13 percent; volume up 3 percent; dollar sales up 7 percent.
- Jennie-O Turkey Store operating profit up 20 percent; volume down 5 percent; dollar sales down 4 percent.
- Specialty Foods operating profit up 74 percent; volume down 2 percent; dollar sales down 5 percent.
- International & Other operating profit down 33 percent; volume down 13 percent; dollar sales down 17 percent.
The company reported fiscal 2016 second quarter record net earnings of $215.4 million, up 20 percent from net earnings of $180.2 million last year. Diluted earnings per share for the quarter were $0.40, up 21 percent from $0.33 last year. Sales for the quarter were $2.3 billion, up 1 percent from last year.
COMMENTARY
“Hormel Foods delivered strong results this quarter, our twelfth consecutive quarter of record earnings, with four of five segments achieving double-digit increases in operating profits,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer. “Excellent results in Refrigerated Foods and Grocery Products were driven by favorable pork operating margins and solid growth posted by value-added products such as HORMEL® NATURAL CHOICE® meats, HORMEL® pepperoni, HORMEL GATHERINGS® party trays, SKIPPY® peanut butter, HORMEL® chili and WHOLLY GUACAMOLE® dips. Specialty Foods has significantly enhanced its margin delivery through efficiency gains and increased branded sales, and continues to focus on innovation, highlighted by the recent launch of MUSCLE MILK® protein smoothies. Specialty Foods also finalized the sale of Diamond Crystal Brands in May,” commented Ettinger. “Jennie-O Turkey Store generated an impressive earnings performance despite lingering effects of turkey supply constraints, while International was challenged by weak exports and high pork costs in China.”
SEGMENT OPERATING HIGHLIGHTS – SECOND QUARTER
Grocery Products (17% of Net Sales, 20% of Total Segment Operating Profit)
Grocery Products segment profit increased 21 percent on favorable raw material costs and improved plant efficiencies. Sales increased 1 percent with growth from SKIPPY® peanut butter and HORMEL®chili offsetting decreases in our chunk meats business.
Refrigerated Foods (48% of Net Sales, 38% of Total Segment Operating Profit)
Segment profit for Refrigerated Foods increased 13 percent driven by strong pork operating margins, the addition of the Applegate business, and growth in many of our value-added products. Including Applegate, sales were up 7 percent led by foodservice sales of OLD SMOKEHOUSE® bacon andHORMEL® FIRE BRAISED™ meats and increased retail sales of HORMEL® NATURAL CHOICE® meats and HORMEL® pepperoni.
Jennie-O Turkey Store (18% of Net Sales, 27% of Total Segment Operating Profit)
Jennie-O Turkey Store segment profit increased 20 percent on improved product mix and favorable input costs. Sales decreased 4 percent reflecting volume shortfalls from the impact of highly pathogenic avian influenza in fiscal 2015.
Specialty Foods (12% of Net Sales, 11% of Total Segment Operating Profit)
Specialty Foods delivered a 74 percent increase in segment profit. Results were driven by lower input costs, a favorable comparison to the plant closure in the prior year, and operational synergies captured within the CytoSport and Century Foods supply chain. Dollar sales decreased 5 percent as increased sales of MUSCLE MILK® protein products were not able to offset reduced contract packaging sales.
International & Other (5% of Net Sales, 4% of Total Segment Operating Profit)
International segment profit declined 33 percent and sales declined 17 percent. Results were impacted by high pork input costs in China and soft demand for our U.S. export products.
OUTLOOK
“We are raising our fiscal 2016 earnings guidance range from $1.50 to $1.56 per share to $1.56 to $1.60 per share based on strong second quarter results and continued expectations for growth in the back half of the year,” stated James P. Snee, president and chief operating officer.
“We look for Refrigerated Foods and Grocery Products to continue driving earnings increases through growth in value-added products combined with favorable input costs,” stated Snee. “Jennie-O Turkey Store is well-positioned to drive sales and earnings growth as turkey production has returned to normalized levels.”
“Specialty Foods will continue to deliver increased sales of MUSCLE MILK® protein products but may not show year-over-year increases in segment sales and earnings as a result of the divestiture of Diamond Crystal Brands,” added Snee. “We expect International to return to growth in the back half of fiscal 2016 led by export sales of our SPAM® family of products and SKIPPY® peanut butter.”
“Today we announced that we have entered into a definitive agreement to acquire Justin’s, LLC, owner of the JUSTIN’S® brand and a pioneer in nut butter-based snacking,” stated Snee. “We are excited to work together with the Justin’s team to bring these great natural and organic products to even more consumers, leveraging key Hormel Foods resources to drive continued innovation and growth to this on-trend category.”
