Hormel increases earnings in 2nd Q

Published 9:50 am Wednesday, May 19, 2010

After increasing earnings by 37 percent in the first quarter, Hormel Foods Corp. followed the effort with a strong second quarter.

Hormel released its second quarter earnings Wednesday morning and reported adjusted net earnings of $91.3 million in the quarter, an increase of 14 percent from $80.4 million last year.

“We are pleased to report excellent earnings and sales for the quarter, which were up 14 percent and 7 percent, respectively,” said CEO Jeffrey M. Ettinger in a press release.

Hormel’s total dollar sales increased 7 percent from last year to $1.7 billion during the second quarter. Hormel’s diluted earnings per share were $0.67, an increase of 14 percent per share from 2009.

However, the earnings didn’t recognize a one-time charge of 10 cents per diluted share due to the closing of Hormel’s Turlock, Calif., plant and the taxes from the new health care laws.

The company’s adjusted segment operating profit was up 18 percent from last year. Diluted adjusted net earnings per share increased 25 percent to $1.50 compared to $1.20 last year. Over a six month period ending April 25, the company’s adjusted net earnings were $202.5 million, a 25 percent increase from the same period last year.

While the company’s grocery products line struggled, a strong quarter in the Jennie-O Turkey Store and the company’s specialty foods segment helped booster the company’s earnings.

“This quarter once again demonstrates the benefit of our balanced business model,” Ettinger said during a conference call.

Operating profit for Hormel’s grocery products line was down 2 percent, partially due to high protein costs. Volume was up 10 percent and sales increased 10 percent. However, two of Hormel’s newest brands met expectations in the quarter.

“We were pleased with the progress made with our new product lines under our MegaMex Foods venture and our Country Crock side dish acquisition, as both product lines contributed to our results this quarter,” Ettinger said.

When accounting for factors like the closing of the Carapelli olive oil line, overall earnings in the grocery line were generally even, Ettinger said.

“Grocery products overall did generate positive sales,” Ettinger said.

While grocery products had a rocky quarter, Jennie-O Turkey Store and the company’s specialty foods segment both reported strong quarters. Jennie-O Turkey Store improved its segment operating profit results by 93 percent from a year ago. The specialty foods segment also fared well with segment profit up 39 percent from 2009.

“Our Jennie-O Turkey Store segment had an outstanding quarter, showing strength across the board,” Ettinger said. “Our Specialty Foods segment also enjoyed a strong quarter, aided by strong sales of nutritional products, sugar substitutes and private label canned meats. Our Refrigerated Foods segment had improved results, primarily resulting from strong cutout margins, and our International segment had weaker results.”

Ettinger said Jennie-O Turkey Store continued to see positive benefits from sponsoring NBC’s “The Biggest Loser.” Likewise, Ettinger said the company benefited from an advertising campaign highlighting the overall Hormel brand.

Hormel’s refrigerated foods segment increased its profitability by 7 percent. Hormel party trays and Hormel pepperoni, both performed well.

The Hormel Compleats microwavable meals line evened out in the second quarter after recent struggles, according to Ettinger. Hormel opened a plant in Dubuque, Iowa, early this year to manufacture the Compleats line.

Looking to the future, Ettinger said the company expects to see continued gradual improvement in the food service environment. Increased hog costs arrived sooner than company officials expected. Ettinger said the increased costs are expected to continue through the year. However, turkey and grain prices appear to be stable, he added.