Increased costs and a larger marketing budget pushed McCormicks earnings down

Increased costs and a larger marketing budget pushed McCormick's earnings down

Spice maker McCormick & Co. has reaffirmed its full-year guidance despite booking a drop in first-quarter profits.

Increased costs and a larger marketing budget pushed McCormick's earnings down 3% to US$74.5m in the three months to the end of February, the Schwarz spice producer said today (27 March).

Operating income edged up 1.1% to $113m. However, the favourable impact of higher sales and cost savings were offset in part by "a steep increase" in material costs and a $9m increase in brand marketing support, the firm said. The rising costs also impacted income from McCormick's joint venture in Mexico, along with unfavourable currency exchange rates.

Sales climbed 16% to $906.7m. Acquisitions completed in 2011 added 7% to sales, while pricing actions taken in response to higher material costs increased sales 5%.

"Our financial results for the first quarter of 2012 demonstrated the effectiveness of our strategy and growth initiatives," said McCormick's president and CEO Alan Wilson. "More than a third of our sales growth was driven by acquisitions in emerging markets that we completed in 2011. We have pricing actions in place as a response to higher material costs, which also led to higher sales."

The company reaffirmed its guidance for fiscal 2012 sales growth 9% to 11% in local currency, and EPS growth in the range of $3.01 to $3.06.