Austin, MN - Hormel Foods Corporation announced earnings of $26,296,000, or $.34 per share of common stock, for the 13-week period ended April 25. This represents a 2.4% increase over second quarter earnings one year ago of $25,688,000, or $.33 per share.
For the first half, earnings were $73,145,000, or 56.7%, over the $46,670,000 reported for the comparable period of fiscal 1997. Earnings per share were $.95 as compared to $.60 per share for the same six- month period one year ago. The six-month results include an extraordinary gain of $17,402,000, or $.23 per share, for the sale of the company's Davenport (Iowa) gelatin/specialized proteins plant to Goodman Fielder Limited, Sydney, Australia. Excluding the one-time gain, the company generated net earnings for the 26 weeks of $55,743,000, an increase of 19.4% over the comparable period of fiscal 1997, or $.73 per share. Under new accounting standards that went into effect last year, Hormel Foods now uses the diluted method of reporting earnings per share. For the first half of fiscal 1998, the number of shares used in calculating the per share amounts was 76,723,000.
Second quarter dollar sales were $778,325,000, a 2.5% decrease from net sales of $798,455,000 for the corresponding 13-week period of last year. Net sales for the first 26 weeks of the current year were $1,593,239,000, down 1.0% from first half sales last year of $1,608,764,000. While dollar sales were down, more importantly, tonnage volume was up 7.8% for the second quarter and 6.8% on a year-to-date basis. Lower selling prices in the marketplace, due to reduced prices for pork raw materials, contributed to the decline in dollar sales.
Joel W. Johnson, chairman of the board, president and chief executive officer, explained that sales and marketing results were strong in the second quarter but not fully reflected in the company's bottom line results. “Procurement agreements with pork producers, designed to provide adequate supplies of raw materials for manufacturing operations, reduced reported earnings because contract prices paid for a portion of the company's hog purchases exceeded prices available in the spot cash market. However,” Johnson added, “the move to contract buying is intended in the long-term to reduce the volatility in supply and price of hogs which we have experienced historically.” Excess supplies of turkey, depressed selling prices and margins also had a negative influence on the company's second quarter performance. “The entire turkey industry continues to operate under difficult business conditions,” said Johnson, “although the outlook appears to be improving.”
Despite these problems, Johnson was encouraged by the performance of the company's core marketing groups. “We enjoyed volume increases in nearly every product category. This indicates our strategic growth plans for consumer- branded, value-added products are on target.” Within the Meat Products Group, pepperoni, breakfast meats and consumer boneless hams continued to develop new distribution and market share gains. Always Tender fresh pork and Always Tender flavored pork reported strong sales volume and distribution growth. The company's consumer-branded fresh pork is sold to many of the nation's best known retail chains comprised of more than 1,000 stores. Always Tender flavored pork is available on a much broader basis and can be found in over 7,500 retail outlets nationwide.
First half dollar sales and tonnage volume for the Grocery Products Division were a record. SPAM luncheon meat, Hormel bacon bits and the company's family of ethnic food brands, House of Tsang, Marrakesh Express, Patak's and Peloponnese, all recorded double-digit volume growth. Increases in advertising and other consumer spending initiatives contributed to volume gains for other well-known product lines, namely Hormel chili, Chi-Chi's Mexican sauces, Herdez Mexican foods and the company's multiple brands of microwave meals.
The Foodservice Group continued its strong performance, posting an eighth consecutive quarter of double-digit sales. Especially strong performers were Bread Ready presliced meats, precooked beef, precooked bacon, fresh and frozen pork cuts and ham, pizza toppings and fresh sausage.
Despite the pricing and profitability pressures faced by turkey operators, Jennie-O Foods has grown to become the industry leader in dollar and volume sales. Tonnage and sales gains have been impressive in retail, deli and foodservice with turkey bacon, turkey burgers, smoked and oven roasted turkey breasts and turkey pan roasts enjoying solid growth. Introduced into the marketplace was a four-item line of premium sliced deli products in hickory smoked, smoked peppered, honey and mesquite varieties and a new precooked, smoked and oven roasted line of whole turkeys.
In China, Hormel Foods International's (HFI) newly opened Beijing plant achieved distribution in over 150 retail outlets and with such key foodservice customers as Subway, Schlotzky's Deli, Dairy Queen and Domino's. The Shanghai plant, opened in late 1997, improved its retail distribution to include more than 550 customers. Elsewhere, HFI registered double-digit export growth in Panama and the Caribbean basin and, in Canada, Stagg chili became the number one selling chili brand.
Meat Industry Insights News Service
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Phone: 631-757-4010
Fax: 631-757-4060
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