Finance Hormel Foods: QIII results

by Editor fleischwirtschaft.com
Thursday, August 23, 2018
Photo: Hormel Foods
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Hormel Foods Corporation, a leading global branded food company, reported results for the third quarter of fiscal 2018. All comparisons are to the third quarter of fiscal 2017 unless otherwise noted.

“We reported record sales and earnings for the quarter and remain on track to deliver our full year earnings guidance range amid volatility due to tariffs and broader industry dynamics,” said Jim Snee, chairman of the board, president, and chief executive officer. “We continue to execute on our strategic initiatives while investing in growth for the future.”

“Grocery Products and International delivered solid results this quarter,” Snee said. “Refrigerated Foods’ branded value-added strategy was able to offset a dramatic decline in commodity profits. We also saw a strong increase in value-added sales at Jennie-O Turkey Store.”

“Last week we announced the sale of our Fremont processing facility to WholeStone Farms, LLC,” Snee said. “This strategic decision reflects changes in the long-term dynamics of the pork industry and is aligned with our vision as a global branded food company. The Fremont facility has been an important part of our Company for decades, and it was critical we partnered with a buyer that would commit to investments in the facility and team members.”

The purchase price is $30 mill. in cash, subject to adjustments at closing, and the transaction includes a processing facility and a multi-year agreement to supply pork raw materials to Hormel Foods. The Fremont plant harvests 10,500 hogs per day and currently represents one-third of the Company’s hog harvest volume and less than one-third of commodity pork earnings. The fiscal 2019 expenses associated with the transaction are anticipated to be $15-$20 mill., primarily related to expenses to relocate value-added manufacturing lines to other Hormel Foods facilities and pension-related expenses. Further guidance on the full earnings impact will be provided on the fourth quarter conference call in November. The transaction is expected to close in December 2018.

Summary

  • Record diluted earnings per share of $0.39, up 15% from 2017 EPS of $0.34
  • Fiscal 2018 earnings guidance reaffirmed at $1.81 to $1.95 per share
  • Record net sales of $2.4 bn., up 7%; organic net sales flat
  • Volume of 1.2 bn. lbs., up 5%; organic volume up 1%
  • Operating margin of 11.1% compared to 12.7% last year
  • Effective tax rate of 18.4% compared to 34.3% last year
  • Year-to-date cash flow from operations of $743 mill., up 40% compared to last year

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