Hormel does record $9.3 billion in sales for fiscal 2014

Published 10:16 am Tuesday, November 25, 2014

Hormel Foods Corp. President and CEO Jeff Ettinger explains details behind a $450 million deal to acquire CytoSport Holdings, Inc., during a press conference Tuesday. -- Trey Mewes/trey.mewes@austindailyherald.com

Hormel Foods Corp. President and CEO Jeff Ettinger explains details behind a $450 million deal to acquire CytoSport Holdings Inc. during a press conference earlier this year. — Trey Mewes/trey.mewes@austindailyherald.com

Hormel Foods Corp. finished 2014 with yet another record-breaking announcement.

Hormel had a record $9.3 billion in sales this year, up 6 percent from 2013. That’s in part due to strong contributions from Hormel’s refrigerated foods and Jennie-O divisions. Overall, Hormel had $171.3 million in fourth-quarter net earnings, up 9 percent from $157.3 million last year.

“This has been the result of the handwork and dedication of a really talented team here at Hormel Foods,” Hormel President and CEO Jeff Ettinger said in a conference call Tuesday.

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Hormel’s total 2014 net earnings came to a record $602.7 million, up 15 percent from $526.2 million last year. Earnings per share rose 14 percent from $1.95 to $2.23 this year, and Hormel officials predict earnings may grow to $2.45 to $2.55 in 2015.

The company also increased its dividends by .20 cents, or 25 percent overall, which will mean dividends of $1 per share.

Division breakdown

Hormel had to battle volatile hog markets this year as the PED virus affected hog volume, which meant increased prices for the company.

Hormel’s grocery products division was down 9 percent in operating profit in 2014, as Skippy and Spam performed relatively flat while other core brands such as Dinty Moore and Hormel Chili declined.

Ettinger said the company’s Mexican brands, including Wholly Guacamole and Herdez, grew during the year, while other products such as bacon toppings also performed well. Hormel officials expect hog prices to normalize in 2015, which will help grocery products grow.

The company’s specialty foods operating profit also declined 20 percent compared to last year, in part because of non-repeating costs concerning Hormel’s acquisition of CytoSports Holdings, the former makers of Muscle Milk.

Yet Jennie-O turkey’s operating profit grew 23 percent this year, and 45 percent in the fourth quarter, in part due to favorable turkey markets. Ettinger credited Jennie-O’s recent Make the Switch advertising campaign as well for Jennie-O’s strong performance.

The refrigerated foods division performed well in 2014, with a 45 percent increase in operating profit and 9 percent increase in dollar sales. Company officials believe the division will continue its growth in 2015 and beyond.

“We expect refrigerated foods operating profit margins to be within 5 to 8 percent over the next few years,” Ettinger said.

Hormel’s international market also grew this year, with a 19 percent increase in operating profit and 19 percent increase in dollar sales. Ettinger announced Hormel would build a third refrigerated foods plant in China, which will open in 2016, to keep up with demand. That will be the fourth Hormel plant overall in China, as Hormel also operates a Skippy production plant.

Yet Hormel will close a grocery products plant in Stockton, Calif., and may shutter underperforming operations in Vietnam next year as well. Hormel announced the Stockton plant closure on Monday.

Ettinger said the company expects to exceed its annual goal of 5 percent profit growth and 10 percent sales growth in 2014. The company will also increase its advertising budget by a double-digit percentage and expects to increase its hog production by 1 to 2 percent next year.

Hormel officials expect its Mexican brands, Jennie-O turkey products and its international divisions to continue growing in 2015 and are planning for further growth across the board. Ettinger said Skippy will likely decrease pricing to match Jif peanut butter price decreases, but the company still believes favorable markets and continued innovation will help Skippy grow.