Press Release: Hormel Foods Reports First Quarter Results

AUSTIN, Minn.-- Hormel Foods Corporation (NYSE: HRL) today reported its performance for the fiscal year 2010 first quarter.

HIGHLIGHTS

First Quarter

• Diluted EPS of $.82, up 37 percent from $.60 per share in 2009
• Segment operating profit up 34 percent from last year
• Dollar sales of $1.7 billion up 2 percent from 2009
• Volume up 3 percent from 2009
• Grocery Products operating profit up 37 percent; volume up 10 percent; dollar sales up 8 percent
• Refrigerated Foods operating profit up 53 percent; volume flat; dollar sales down 1 percent
• Jennie-O Turkey Store operating profit up 14 percent; volume up 7 percent; dollar sales up 5 percent
• Specialty Foods operating profit up 28 percent; volume up 1 percent; dollar sales up 5 percent
• All Other operating profit down 6 percent; volume up 5 percent; dollar sales up 1 percent
• The Country Crock® chilled side dish line was acquired from Unilever effective February 1, 2010

The company reported fiscal 2010 first quarter net earnings of $111.2 million, up 37 percent from earnings of $81.4 million a year earlier. Diluted earnings per share for the quarter were $.82 this year compared to $.60 per share last year. Sales totaled $1.73 billion, which was up 2 percent from fiscal 2009.

COMMENTARY

“We are pleased to report record earnings and sales for the quarter. Four of our five business segments delivered double-digit profit gains during the quarter. We are particularly gratified to see the solid improvement in sales and will continue to focus our efforts in this area. Our announcement last week regarding our new Hormel brand advertising campaign demonstrates our commitment to growing our top-line,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer.

“Our Grocery Products segment had an excellent quarter, with strong sales of canned meats and Mexican food products. Our Refrigerated Foods segment had a strong quarter, helped by improved cutout margins. Our Jennie-O Turkey Store segment showed strength, largely as a result of a better whole bird season. They also experienced improved sales of value-added products. Our Specialty Foods segment had a good quarter, with strong sales of private label products and sugar substitutes, while our International segment experienced weaker results,” remarked Ettinger.

SEGMENT OPERATING HIGHLIGHTS – FIRST QUARTER

Grocery Products (15% of Net Sales, 29% of Total Segment Operating Profit)

The Grocery Products segment achieved an impressive segment operating profit improvement of 37 percent versus 2009. Lower costs and increased revenues of our core products such as Hormel® chili, Dinty Moore® stews, and the SPAM® family of products drove profitability. We were also pleased with the contribution from our new MegaMex Foods business. Overall, revenue increased 8 percent for the quarter.

Refrigerated Foods (52% of Net Sales, 38% of Total Segment Operating Profit)

The Refrigerated Foods segment finished a strong first quarter with segment operating profit 53 percent greater than last year, as favorable spreads between hog costs and primal values benefitted the segment. Revenue was flat for the quarter, as we experienced softer demand for hams, bacon and commodity pork. Additionally, the foodservice sales environment remains weak.

Jennie-O Turkey Store (18% of Net Sales, 18% of Total Segment Operating Profit)

Jennie-O Turkey Store improved its segment profit results by 14 percent during the first quarter. Stronger whole bird sales and better commodity meat prices helped drive results. Revenue increased 5 percent for this segment due to increased whole bird and value-added sales.

Specialty Foods (11% of Net Sales, 11% of Total Segment Operating Profit)

Segment profit for Specialty Foods increased 28 percent, with positive contributions from each of its three business units. Improved results were driven primarily by sales of private label products and sugar substitutes. Revenue grew 5 percent, led by higher contract manufacturing and sugar substitute sales.

All Other (4% of Net Sales, 4% of Total Segment Operating Profit)

The All Other segment, which consists of Hormel Foods International, experienced a segment profit decline of 6 percent for the quarter, due primarily to weaker exports of fresh pork products. Revenue was up modestly for the quarter due to strong exports of the SPAM® family of products.

Net Interest and Investment Income

Net interest and investment income was negatively impacted by lower returns on the rabbi trust investments during the first quarter, compared to a year ago.

General Corporate Expense

General corporate expenses were higher in the first quarter due to increased pension and employee benefit expenses.

OUTLOOK

“As a result of our better than expected results in the first quarter, we are raising our full year guidance range from $2.63 to $2.73 per share to $2.68 to $2.78 per share. We anticipate higher hog costs as we progress through the year, and we recognize the strong investment performance in our rabbi trust last year will result in a more difficult comparison. Nevertheless, we believe our strong portfolio of branded products and the strength of our dedicated team should allow us to build upon the momentum of our excellent start,” concluded Ettinger.

DIVIDENDS

Effective February 15, 2010, the Company paid its 326^th consecutive quarterly dividend, at the annual rate of $.84.

CONFERENCE CALL

A conference call will be Webcast at 8:00 a.m. CT on Thursday, February 18, 2010. Access is available at http://www.hormelfoods.com. If you do not have Internet access and want to listen to the call over the phone, the dial in number is 800-762-8779 and you must provide the access code of 4198205. An audio replay is available by calling 800-406-7325 and entering access code 4198205. The audio replay will be available beginning at 10:30 a.m. CT on Thursday, February 18, 2010, through 11:59 p.m. CT on Thursday, March 4, 2010. The Webcast replay will be available at 10:30 a.m. CT, Thursday, February 18, 2010, and archived for one year.

ABOUT HORMEL FOODS CORPORATION

Hormel Foods Corporation, based in Austin, Minn., is a multinational manufacturer and marketer of consumer-branded food and meat products, many of which are among the best known and trusted in the food industry. The company leverages its extensive expertise, innovation and high competencies in pork and turkey processing and marketing to bring quality, value-added brands to the global marketplace. The company is a member of the Standard & Poor's 500 Index. Hormel Foods has been named one of “The 400 Best Big Companies in America” by Forbes magazine for 10 consecutive years. The company enjoys a strong reputation among consumers, retail grocers, foodservice and industrial customers for products highly regarded for quality, taste, nutrition, convenience and value. For more information, visit http://www.hormelfoods.com.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking information based on management’s current views and assumptions. Actual events may differ materially. Please refer to the cautionary statement regarding Forward-Looking Statements and Risk Factors that appear on pages 30-35 in the company’s Annual Report for the fiscal year ended Oct. 25, 2009, which can be accessed at www.hormelfoods.com under “Investors-SEC Filings.”

“Country Crock” is a registered trademark of the Unilever Group of Companies and is used under license. All rights reserved.

Print | posted on Thursday, February 18, 2010 2:43 PM