010545 Ham Sales Drive Hormel Earnings

Chicago - Hormel Foods Corp., maker of Spam luncheon meat and Dinty Moore beef stew, said its fiscal second-quarter earnings rose 7%, driven by acquisitions, solid sales of holiday hams and growth in sales of prepackaged processed meats.

Austin, Minnesota-based Hormel reported net income of $38.9 million, or 28 cents per share, for the quarter ended April 28, up from $36.3 million, or 26 cents a share, a year earlier.

Analysts' earnings estimates ranged from 25 cents to 30 cents per share, with an average of 28 cents, according to research firm Thomson Financial/First Call.

Second-quarter sales rose 16% to $1.0 billion from $879 million a year earlier, and tonnage volume increased by 10%.

Chief Financial Officer Michael McCoy said in a conference call that Hormel expects to meet the analysts' third-quarter consensus estimate of 26 cents a share.

The February acquisition of Turkey Store Co. and strong sales of fresh pork, holiday ham and prepackaged processed meats helped offset slow growth in the company's food-service business and in sales of grocery products such as Spam and Hormel chili, Hormel said.

The acquisition gave Hormel an 18.5% share of the U.S. turkey market. Post-acquisition sales tonnage is up 36%, and sales dollars are up 50%.

Merrill Lynch analyst Leonard Teitelbaum said he still sees Hormel fiscal 2001 earnings at $1.35 to $1.40.

“The acquisition of The Turkey Store was “from a strategic point of view a brilliant acquisition for Hormel,” Teitelbaum said. “Integrations are going well and from this point on we are looking at volumes. I think the company is on a roll."

McCoy said Hormel still expects capital expenditures of $115 million for the current fiscal year and sees capital expenditures of $100 million in the following year.

Fiscal second-quarter earnings met expectations despite expenses related to a three-week strike in Rochelle, Illinois.

The acquisition of Diamond Crystal Brand Nutritional Products closed on April 27 and had no second- quarter impact on Hormel's HealthLabs unit.

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