Hormel Foods Reports Fourth Quarter and Full Year Results
The company reported fiscal 2008 fourth quarter net earnings of $67.8 million, down 33 percent from earnings of $101.2 million a year earlier.
25/11/08 Hormel Foods Corporation reported its performance for the fiscal 2008 fourth quarter and full year.
The company reported fiscal 2008 fourth quarter net earnings of $67.8 million, down 33 percent from earnings of $101.2 million a year earlier. Included in this year’s quarterly results is a $20.4 million investment loss in the company’s rabbi trust, compared with a $4.6 million gain a year ago. Diluted earnings per share for the quarter were $.50 this year compared to $.73 per share last year and sales totaled $1.86 billion, up from $1.66 billion in fiscal 2007.
For the twelve months ended October 26, 2008, net earnings were $285.5 million, or $2.08 per diluted share (down 4 percent), compared to $301.9 million a year ago, or $2.17 per diluted share. Included in this year’s annual results was a $29.0 million loss in the rabbi trust, compared with a gain of $6.9 million a year ago. Sales totaled $6.75 billion, up 9 percent, from $6.19 billion in the same period last year.
COMMENTARY
“As we previously announced, the recent substantial decline in global financial markets negatively impacted our rabbi trust investment performance. This, along with greater than expected cost pressures and unfavorable product mix changes in our Grocery Products segment, required us to lower our guidance to $2.03 to $2.09 from our earlier guidance range of $2.22 to $2.28 per share” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “A better than expected finish by our Refrigerated Foods segment allowed us to come in at $2.08 per share, near the high end of our revised guidance range.”
“The rabbi trust was established in 2003 to fund certain nonqualified supplemental executive retirement and deferred income plans. The trust assets are invested in equity and income securities and generally track the market. The trust assets are considered trading securities, accordingly, gains and losses are included in our quarterly earnings on a mark-to-market basis. These investment losses do not affect the company’s cash flow, nor does the company have any obligation to recapitalize the trust funds,” explained Ettinger.
“Despite strong sales of the SPAM family of products and other canned items, our Grocery Products segment had an off quarter. The lower results were driven primarily by higher beef and pork trim costs, but also as a result of a slowdown of our HORMEL COMPLEATS microwave meal business. Our Jennie-O Turkey Store segment continued to experience higher feed and fuel input costs during the quarter that they were unable to offset with increased pricing. An industry-wide over-supply of breast meat kept prices below our cost of production. We do not expect this situation will significantly improve until next spring,” Ettinger stated.
“For the full year, we generated strong volume and sales increases across each of our segments. In addition, four of our five segments had earnings up from a year ago, and total segment operating profits were up six percent from a year ago. We continue to grow our sales of new value-added products and remain on track to meet our goal of $2 billion of new product sales by 2012,” Ettinger commented.
“This morning we announced a $.02 per share increase to our annual dividend, making the new dividend $.76 per share. This is the 43rd consecutive year in which we’ve increased our dividend,” Ettinger concluded.
SEGMENT OPERATING HIGHLIGHTS – FOURTH QUARTER
Grocery Products (14% of Net Sales, 28% of Total Segment Operating Profit)
The Grocery Products segment reported a 3 percent decrease in operating profit for the quarter compared to last year. Higher input costs and an unfavorable sales mix contributed to the decline. Sales of HORMEL COMPLEATS microwave meals also softened during the quarter, which appears to be consistent with trends in other convenient packaged meal segments. On the positive side, sales of our SPAM family of products, HORMEL chili and DINTY MOORE stews experienced double-digit increases during the quarter.
Refrigerated Foods (51% of Net Sales, 39% of Total Segment Operating Profit)
Segment operating profit for the Refrigerated Foods segment increased 12 percent for the quarter, primarily attributable to an improved spread between hog costs and primal values. The Meat Products business unit experienced increased sales for the quarter; however, pricing actions were unable to keep pace with rising input costs. Operating results for the Foodservice division declined for the quarter due to an industry-wide softness in away-from-home dining.
Jennie-O Turkey Store (20% of Net Sales, 16% of Total Segment Operating Profit)
Jennie-O Turkey Store experienced a 44 percent decline in operating profit for the quarter. Commodity meat sales profitability continued to suffer as the oversupply of breast meat in the market did not allow for adequate offset of higher feed and fuel costs, which increased $40 million from the same period last year.
Specialty Foods (11% of Net Sales, 13% of Total Segment Operating Profit)
The Specialty Foods segment completed an exceptional quarter with sales, volume and segment operating profit all experiencing double digit increases. The Specialty Products business unit achieved gains from contract packaging and savory products. The third quarter acquisition of Boca Grande Foods, Inc. enhanced the results of Diamond Crystal Brands. Century Foods International also achieved strong results, primarily with ready-to-drink products.
All Other (4% of Net Sales, 4% of Total Segment Operating Profit)
The All Other segment, which includes the International business unit, achieved double-digit increases in both sales and tonnage, primarily due to strong exports of fresh pork and the SPAM family of products. In spite of these gains, operating profit for the quarter decreased 8 percent, due to higher than expected raw material costs and a stronger dollar.
