US: Q2 profits boost McCormick H1

MCCORMICK REPORTS STRONG FINANCIAL RESULTS FOR SECOND QUARTER 2012 AND REAFFIRMS 2012 OUTLOOK

SPARKS, Md.--(BUSINESS WIRE)--Jun. 27, 2012-- McCormick & Company, Incorporated (NYSE:MKC), a global leader in flavor, today reported strong sales and profit growth in the second quarter of fiscal year 2012 and reaffirmed its 2012 outlook.

Grew second quarter net sales 11% with contributions from acquisitions, pricing actions and increased volume and product mix.

Reported earnings per share of $0.60 for the second quarter, a 9% increase from the year-ago period.

Generated cash flow from operations of $144 million through the first half of fiscal year 2012.

Reaffirmed projected 2012 earnings per share of $3.01 to $3.06.

Alan D. Wilson, Chairman, President and CEO, commented, "We achieved a double-digit increase in sales and strong profit growth in our second quarter. In a difficult economic environment, McCormick is delivering financial results that demonstrate the strength of our brands and our customer relationships in markets around the world. Acquisitions, new products, marketing programs and expanded distribution are driving sales growth in each geographic region, with particular strength in emerging markets which accounted for 14% of second quarter sales.

"Across all of our businesses, we continue to face volatile material costs. As reflected in our gross profit margin, which was comparable with the second quarter of 2011, our pricing actions and cost savings from our Comprehensive Continuous Improvement (CCI) program are effectively offsetting the impact of higher material costs. CCI is also helping to fuel our growth and through the first half of 2012, we increased our brand marketing support by 15%. This increase, along with product innovation and other initiatives to grow sales, have created momentum as we head into the second half of 2012."

McCormick’s second quarter sales rose 11%, and in local currency the increase was 13% when compared to the year-ago period. In local currency, acquisitions completed in 2011 added about half of this increase, while pricing actions taken in response to higher material costs and volume and product mix also contributed to the increase. Operating income rose 11% to $121 million from $109 million in the second quarter of 2011. The favorable impact of higher sales and cost savings from McCormick’s CCI program more than offset increased material costs and a $4 million increase in brand marketing support. Income from unconsolidated operations declined $2 million due largely to the impact of unfavorable foreign currency exchange rates on McCormick’s joint venture in Mexico.

Second quarter earnings per share rose to $0.60 from $0.55 in the year ago quarter, driven mainly by the increase in operating income, as well as a favorable tax rate. These increases were offset in part by the lower income from unconsolidated operations and higher interest expense.

Through the first half of 2012, the Company generated cash flow from operations of $144 million compared to $36 million in the first half of 2011. This improvement in cash flow from operations was largely a result of a much lower increase in inventory in the first half of 2012. At May 31, 2012, inventory remained above historical levels due primarily to higher material costs and acquisitions, but declined from inventory on the balance sheet at the end of the first quarter of 2012. Due to the seasonality of McCormick’s business, cash flow from operations typically increases significantly in the second half of the fiscal year.

For fiscal year 2012, the Company reaffirmed its projected sales growth of 9% to 11% in local currency, which includes an estimated 4% contribution from acquisitions completed in 2011. Unfavorable foreign currency exchange rates are expected to have a 2% unfavorable impact. In addition, the Company reaffirmed its outlook for operating income growth of 9% to 11%, which includes approximately $15 million of incremental brand marketing support. The range of earnings per share projected for fiscal year 2012 remained $3.01 to $3.06, reflecting the higher operating income offset in part by lower income from unconsolidated operations.

The Company expects the growth rate in earnings per share to be greater in the fourth quarter of 2012 than in the third quarter of 2012 due in part to a projected further decline in income from unconsolidated operations for the third quarter of 2012. In addition, the 2011 results were affected by transaction costs related to the completion of acquisitions, which lowered earnings per share in the fourth quarter of 2011 by $0.05, as well as a shift in sales from the fourth quarter into the third quarter due to customer purchases in advance of a price increase.

Original source: http://www.mccormickcorporation.com/