Despite challenges, Hormel nets record profits; Company expects strong finish to 2015
Hormel Foods Corp. continued to post record profits over the past quarter despite a severe shortage in turkey livestock and decreasing international sales.
Hormel announced Wednesday $146.9 million in third-quarter net earnings, up 6 percent from $138 million. In addition, record volume sales were up 3 percent and Hormel posted a record diluted earnings per share of $.54. Hormel officials also increased its 2015 GAAP earnings guidance range to $2.57 to $2.63, from its previous guidance at $2.50 to $2.60.
“2015 is shaping up to be an excellent year in terms of growth for the company,” Hormel Foods CEO Jeff Ettinger said in a phone conference Wednesday morning.
Hormel’s highlights for the quarter include its grocery products division’s segment operating profit up 57 percent compared to last year. Grocery products sales also increased by 8 percent.
Refrigerated foods profits increased by 9 percent as well.
Yet Hormel faced several challenges over the past quarter. The company’s $2.2 billion in dollar sales marks a 4 percent decrease over the past year.
Jennie-O Turkey Store reported a 45 percent decrease in its segment profits after avian flu outbreaks in Minnesota over the summer dramatically affected Hormel’s turkey stock. At one point, 55 farms which served Hormel had been closed because of the flu.
Despite what Ettinger called an “unprecedented shortage” in turkey supplies, Hormel has repopulated about two-thirds of its turkey supply at company farms and expects to operate at normal capacity by the end of the fall, barring further flu outbreaks. Still, Hormel expects turkey volume struggles through the beginning of 2016.
“It’s just such a wild card,” Ettinger said.
In addition, Hormel officials have seen decreasing sales in the company’s Asian markets over the past few quarters, though the company’s international division posted a 3 percent profit increase in the third quarter. Ettinger highlighted strong company performance in Hormel’s China business and expected the company to recover from a decline in pork exports.
“This year, it’s going to be a solidly double-digit returning entity,” Ettinger said.
Hormel expects continued growth in its specialty foods division moving forward, partially driven by its recent acquisition of CytoSports Holdings, the company behind Muscle Milk. Specialty foods reports a 79 percent increase in segment profits this quarter with a 31 percent sales increase.