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Turkey sales lead Hormel profit higher
A decrease in pork prices also helped produce a rebound from the first three quarters.
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It was supposed to be a turkey of a quarter, but then the turkeys sold.
As other food companies have been hit hard by rising energy and commodity costs, Hormel Foods Corp. on Tuesday reported broad increases in fourth-quarter sales and profits, beating estimates and raising its dividend. Sales jumped 7 percent to $1.66 billion in the fourth quarter, ending Oct. 28, over the same period last year. Earnings rose 12 percent to $101.2 million.
A month ago, Hormel told analysts it was having a tough year. The first three quarters were especially hard for the company's Jennie-O Turkey Store, which suffered through steep increases in the cost of animal feed, causing what Chief Executive Jeffrey Ettinger called a "year of distractions."
The company's salvation came from strong consumer demand, a rebound in turkey sales and a drop in the price of pork, adding strength to company margins.
The boon allowed the company to make its largest ever increase in dividend payments, a 23 percent jump to 74 cents per share.
Tuesday's news also beat estimates for both quarterly and annual earnings -- hitting 73 cents per share vs. the analysts' estimate of 65 cents for the quarter and $2.17 per share for the year vs. the estimate of $2.09.
Annual sales jumped 8 percent to $6.19 billion for the year ended Oct. 28. Earnings rose 6 percent for the year to $301.9 million.
Ettinger credited momentum in the Jennie-O and the refrigerated foods segment for the company's strong finish. Ettinger said the turkey division automated some parts of its operation, changed some logistics and used technology to get higher yields, all of which helped boost numbers.
The turkey business' operating profit fell 17 percent for the year, a decrease attributed mainly to $80 million in higher feed grain costs. Operating profit shot up 15 percent in the fourth quarter, surprising analysts such as Oliver Wood at Stifel, Nicolaus & Co., who said the news sends the turkey business into 2008 with "solid momentum."
Each division saw quarterly sales increase: grocery products, 2 percent; refrigerated foods, 8 percent; Jennie-O, 7 percent, and Specialty Foods, 5 percent.
The company's largest unit by sales, refrigerated foods, had profit growth of 15 percent for the quarter.
The company also pushed through price increases of 3 to 5 percent. Ettinger said it's too soon to know if more price increases will be necessary.
"There may be some more in the works," he said, adding that he doesn't want Hormel to "test the upper limit" of those.
Matt McKinney • 612-673-7329
Matt McKinney • mckinney@startribune.com
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