Hormel had record earnings and sales in Q3.
Grocery Products segment
Sales in the Grocery Products segment increased by 21 percent. Excluding the Don Miguel products that Hormel started selling in Q3, sales grew by 3 percent. There was growth in SPAM products, Hormel Compleats and Megamix products. Advertising surrounding the 75th anniversary of SPAM led to a sales increase. Hormel introduced new microwave meals in Q3, including SPAM Meals and Hormel sandwich makers. It will be introducing new Compleat meals that include cheesy pasta.
Sales of Hormel's Mexican products are also growing with Wholly Guacamole Dip and salsas and tortillas under the Herdez and CHI-CHI'S brands leading the way.
Operating profits in the Grocery Products segment grew by 32 percent.
Refrigerated Foods segment.
Sales in refrigerated products were flat. Pork margins were lower, but sales of value-added products offset those declines. Pork prices are seasonally lower in Q4 as hog supply is higher in the fall. Pork margins should remain positive, but they will be below the levels seen in Q4/2011.
Jennie-O Turkey Store
Sales increased by 7 percent and operating profit increased by 12 percent. Sales of turkey burgers and Jennie-O Turkey Store retail tray pack fresh turkey increased. Hormel will be showing a new television advertisement this fall under its Make the Switch market campaign. This advertisement will be focusing on turkey bacon and sausage.
Margins for Jennie-O will be pressured by higher grain prices in Q4. Hormel nevertheless expects the results for Jennie-O in Q4 to be similar to those in Q3. There is a 22 week lag in marketing Tom Turkeys, so there will be a lag in the increased grain prices translating into higher turkey prices. Hormel is trying to keep supplies tight to combat the increased grain prices.
Special Foods segment.
Sales in Specialty Foods increased by 11 percent and operating profit increased by 18 percent. Nutritional products and private label canned meats and ingredients led to profit gains.
All Others International Segment.
Sales increased by 2 percent and operating profit increased by 55 percent. Exports of SPAM and fresh pork were the primary contributors to sales and profits.
Financials.
Sales increased 5 percent in Q3 and volume grew by 4 percent.
EPS was $.41 in Q3, an increase of 14 percent. Hormel is maintaining its estimate of EPS for fiscal year 2012 of $1.79 to $1.89.
Hormel repurchased 302,000 shares of stock during Q3 for a total of $8.6 million. It has 1.6 million of shares available for repurchase under its share repurchase program.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/824371-hormel-foods-management-discusses-q3-2012-results-earnings-call-transcript?page=2
Copyright 2012 Jaygo's Earnings Conference Call Summaries
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
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