Hormel Foods Corporation, a leading global branded food company, has reported results for the first quarter of fiscal 2019. All comparisons are to the first quarter of fiscal 2018 unless otherwise noted.
EXECUTIVE SUMMARY
- Fiscal 2019 earnings guidance reaffirmed at $1.77 to $1.91 per share
- Volume of 1.2 billion lbs., up 1%
- Net sales of $2.4 billion, up 1%
- Pre-tax earnings of $307 million, up 1%
- Diluted earnings per share of $0.44, down $0.12 per share due to the impact of tax reform in 2018
- Effective tax rate of 21.3% compared to 0.6% last year
- Operating margin of 13.0% compared to 13.0% last year
- Cash flow from operations of $187 million, down 38%
COMMENTARY
“We had a solid quarter with sales growth from Refrigerated Foods, Grocery Products and International,” said Jim Snee, chairman of the board, president and chief executive officer. “Three of our four segments generated earnings growth, which keeps us on track to deliver our full-year guidance.”
“Our new Hormel Deli Solutions division is off to a great start as the next growth engine for our company,” Snee said. “In addition, many branded value-added businesses performed well this quarter, including our business in China and both Hormel and Jennie-O foodservice divisions. We also saw impressive growth from many retail brands, including SPAM®, Dinty Moore®, Herdez®, Wholly Guacamole®, Applegate®, Natural Choice® and Hormel® pepperoni.”
“Again this quarter, our well-developed strategy of shifting our mix toward branded, value-added products in our domestic and international businesses more than offset significant declines in the commodity businesses,” Snee said. “We continue to intentionally transition our portfolio away from commodity products and the associated earnings volatility.”
CYTOSPORT DIVESTITURE
“Earlier this week we announced a definitive agreement to sell the CytoSport business to PepsiCo,” Snee said. “We made strong progress with innovation and sales growth in the food, drug and mass channel. However, it became clear to us over time that PepsiCo is the right long-term owner of this business as they have deep expertise in this space. PepsiCo has been a long-standing distribution partner for CytoSport and the Muscle Milk® brand, which puts them in a strong position to grow this dynamic business.”
The purchase price is $465 million in cash, subject to adjustments at closing. Total net sales in fiscal 2018 were approximately $300 million with operating margins slightly below total company operating margins.
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