Hormel up 20 percent in second quarter

Published 9:29 am Wednesday, May 25, 2011

Hormel Foods Corp. looks like its on pace for another record-setting year.

Hormel reported double-digit growth in earnings and sales in the fiscal 2011 second quarter. The company boasted net earnings of $109.6 million, up 20 percent from adjusted net earnings of $91.3 million a year earlier, and $2.0 billion in total sales, up 15 percent from last year’s $1.7 billion.

For the six months ending May 1, net earnings were $258.4 million, up 28 percent from adjusted net earnings of $202.5 million the same period last year.

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“This bodes well for our continued success,” CEO Jeff Ettinger said in a conference call today, pointing out this was the fifth-consecutive quarter for a year-over-year sales increase.

The company continues to see growth after a record-setting fiscal 2010. Hormel tallied $7.2 billion in total sales that year, an 11 percent increase from fiscal 2009. In the first quarter of fiscal 2011, the company boasted net earnings of $148.8 million — up 34 percent from that quarter last year.

The refrigerated foods and Jennie-O Turkey segments — which make up 72 percent of Hormel’s net sales — continue to carry their weight, up 27 percent and 45 percent, respectively, in operating profit from last year.

“Earnings growth was led by our refrigerated foods and Jennie-O Turkey Store segments, both of which had a strong quarter. We are also gratified to attain sales growth in all five of our segments,” Ettinger said in a press release.

The two segments “generated excellent results,” Ettinger said, adding that the refrigerated foods segment benefiting from strong pork operating margins while Jennie-O was aided by stronger commodity meat prices and improved efficiencies.

Hormel’s segment that includes mainly international sales was up 104 percent in profit and 45 percent in dollar sales. Ettinger attributes that growth to international Spam sales and strong export sales.

“Our international business … also achieved impressive results,” he said.

The company’s grocery products and specialty foods segments — responsible for 23 percent of net sales — saw operating profits decline by 9 percent and 11 percent, respectively. The company attributes that to soft sales in microwave products and imported canned meats and higher raw material costs. However, the grocery segment reported positive results from Spam products, Hormel bacon toppings and Dinty Moore stew.

While the first two quarters of fiscal 2011 were extremely favorable, Ettinger said, he expects the second half of the year to more difficult, mainly because of higher commodity prices and input costs.

“Clearly the first half has been a blowout; it was very strong,” he said. “The second half should be more moderate, but we should be quite happy with where 2011 ends up.”