• Shares fall by 8% on worse-than-expected forecasts
  • Q4 profits miss consensus
  • Group upbeat on managing costs with increasing sales

US spice group McCormick has seen its shares lose 8% of their value after analysts and investors reacted with disappointment to the group's forecasts for 2013.

The share slide eroded much of the stock market gains McCormick has made in the previous six months. Shares in the company dropped in early trading today (24 January), despite the spice and flavour specialist reporting an 8.5% rise in net sales and a 9% increase in net profits.

Analysts said the firm missed consensus estimates on fourth quarter earnings per share, as well as on sales. There was also cost pressure on gross margins, which meant full-year operating profits rose more slowly than sales, up by 7%.

McCormick itself appeared upbeat on its 2013 prospects, albeit forecasting a slowdown in momentum. It predicted sales and earnings per share would rise in low-to-mid single digits, while it also estimated that raw materials costs would come down significantly versus 2012.

It was not enough for several commentators. Analysts at Janney highlighted that McCormick has outperformed peers over the past decade, having doubled net sales to $4bn, but they expressed concern about its exposure to risks.

"Looking ahead to 2013, the company is staring at difficult industrial volume comps, sluggish European and Chinese markets, continued cost inflation (+3%), and minimal pricing; not to mention higher tax rates and retirement benefit expenses," said Janney analysts.

"The market appeared to be anticipating an earnings step-up from gross margin, lower inventories, or both in the quarters ahead – this morning’s print suggests that will not be the case."

"Consumer demand for flavour continues to grow," said the McCormick's president, chairman and CEO, Alan Wilson.

"The spice and seasoning category is growing at rates from 3% to 8% in our major markets, and our brand leadership, product innovation and marketing programs have us well-positioned to meet this demand."