Tax reforms boost Hormel Foods’ first quarter earnings
The business recorded sales of $2.3 billion which were up 2% while its organic produce net sales were up 1%. Volume sales for the business were down 4% to 1.2 billion lbs.
Its first quarter earnings benefited from $63 million, or EPS of $0.12, in one-time tax events.
Jim Snee, chairman of the board, president, and chief executive officer said it was a “strong quarter”.
"We are pleased to report a strong quarter of earnings growth,” he said. “In addition to the benefit from tax reform, Grocery Products delivered excellent earnings growth which was partially offset by continued challenges at Jennie-O Turkey Store and higher-than-expected freight costs.”
Other highlights from the quarter included the completion of the Columbus Craft Meats acquisition.
“This quarter we also completed the strategic acquisition of Columbus Craft Meats," Snee said. “The Columbus brand is on-trend with today's consumer and meaningfully changes our presence in the deli while helping us become a broader food company. Tax reform had a positive impact on our business, and the additional funds will allow us to invest in profitable growth, invest in our employees and communities, and return cash back to shareholders.
"For the quarter, Grocery Products, Refrigerated Foods, and International met our expectations. Organic sales growth was led by many key brands including retail sales of Hormel Black Label bacon, Wholly Guacamole dips, Muscle Milk protein beverages, and SPAM products in addition to foodservice sales of Hormel Bacon 1TM fully cooked bacon and Hormel Fire BraisedTM meats."
It also created a new deli division for the business.
"We recently announced the creation of a new deli division in Refrigerated Foods which will consolidate all our deli businesses across the enterprise including Columbus Craft Meats, the Jennie-O Turkey Store deli division, the Hormel and Di Lusso deli brands, and Hormel Gatherings party trays. This new deli organization will help retailers drive growth in this on-trend and growing category with an unmatched array of innovative solutions. Our new deli division represents almost $1 billion in annual sales and will be the Company's next growth engine."
Looking ahead, Snee added there will be both “opportunities and challenges”.
"Fiscal 2018 brings both opportunities and challenges," he said. "Tax reform will have a clear benefit and allow us to increase investments into our business to drive long-term profitable growth. We continue to build earnings power through our three recent strategic acquisitions and increased capital investments for value-added capacity. While our expectations for Grocery Products, Refrigerated Foods and International have not changed, we project a slower-than-expected recovery at Jennie-O Turkey Store as we continue to work through a difficult operating environment in the turkey industry. Freight costs will continue to be a headwind for the balance of the year and we are working to mitigate the impact through long-term sustainable solutions across our entire supply chain."
