Hormel Foods Cloudy outlook, Q1 net income flat
Net income for the first quarter ended 29 January, 2017, was flat at $235,147,000 or $0.44 per diluted share, compared to first-quarter 2016 net earnings of $235,061,000 or $0.43 per diluted share.
Net sales for the period eased 1% to $2,280,227,000 compared to $2,292,672,000 reported a year ago. Excluding the impact from the Justin’s LLC acquisition, and the divestitures of the Diamond Crystal Brands and the Farmer John businesses, non-GAAP adjusted sales advanced 3%.
On a segment basis, Jennie-O Turkey Store profit sharply declined 25% to $68,180,000 from $91,303,000 reported in the year-ago quarter. Hormel attributed the result to reduced supplies of turkey due to an outbreak of highly pathogenic avian influenza, higher commodity prices and pricing pressure from competing proteins sold through foodservice, deli and retail stores. Sales in the segment climbed 13%, while volume increased 22%. Hormel said the increase in sales for the quarter was linked to the HPAI impacted results from 2016.
Sales in the Grocery Products business increased 7% to $417,745,000 in the first quarter, up from $392,218,000 reported a year ago, reflecting the company’s acquisition of Justin’s specialty nut butters along with strong sales of Wholly Guacamole dips, Skippy peanut butter products and Herdez brand salsa, the company said. Segment profit climbed 1%. Results were partially offset by higher advertising expenses in support of key brands such as Wholly Guacamole and Herdez, the company said, in addition to integration costs related to the Justin’s acquisition.
Refrigerated Foods reported $173,808,000 in first-quarter segment profit, an increase of 4% compared to $166,908,000 reported in the first quarter of 2016.
The company’s value-added products drove results in the first quarter. Innovative foodservice items such as Hormel Bacon fully cooked bacon and Hormel Fire Braised meats delivered solid growth. Retail items such as Hormel Gatherings party trays, Hormel Natural Choice meats, and Applegate bacon and breakfast sausage delivered growth. Net sales for the segment declined 3.4% to $1,123,039,000, compared to $1,123,039,000 reported in the year-ago quarter due to the sale of the Farmer John business, Hormel said.
Results for the Specialty Foods segment reflected the sale of Diamond Crystal Brands (DCB). For the first quarter, net sales in Specialty Foods declined 19% to $192,629,000 compared to $237,779,000 reported in the first quarter of 2016. Segment profit eased 0.2% to $26,749,000 from $26,793,000 reported a year ago.
Finally, segment profit in the International business climbed 4.8% to $25,463,000 compared to $24,287,000 reported in the first quarter last year. Profit climbed on strong pork export margins.
Pork exports saw double-digit increases in net sales growth in the first quarter, but the gains were unable to offset declines for branded exports, according to the company. Net sales in the International segment were down 2.1% to $125,825,000 compared with $128,488,000 reported in the year-ago quarter. Hormel said delays in shipments to key markets shifted volume into the second quarter of 2017.