US food group Hormel Foods said it expects the second half of its fiscal year to be more “challenging” due to high hog prices.
Speaking on the firm’s half-year earnings conference call, Jeffrey Ettinger, Hormel’s chairman of the board and CEO, said the company’s grocery and refrigeration division are likely to be challenged more than any other unit in the next six months.
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“We have not completed any budgeting cycle yet for 2011 but as we’ve said before, one element of our company provides some short-term challenges as costs go up quickly, and we have certainly seen that in the pork area,” Ettinger said.
“Based into our second-half numbers, the expectation is that it’s going to be a more challenging environment for grocery products and refrigerated foods. We do think some of the other segments can offset that substantially, but that is out there,” he added.
Ettinger said the firm would have to react to the economic change and change prices if necessary.
“I would expect our team to react to the environmental change, and we are either going to have to address pricing if there is a new higher cost level that is going to stay in place, or if some of those costs recede, we should be in a position in 2011 to achieve our normal long-term growth objectives,” Ettinger said.
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By GlobalDataThe firm this morning raised its full-year profit target despite seeing second-quarter earnings fall more than 3% on one-off charges.
The company booked net income of US$77.9m for the three months to 25 April, down from $80.4m a year earlier.
Ettinger said the firm would continue to actively explore acquisition opportunities.
“We have probably been just as active as ever in terms of exploring ways to grow our business using the cash we know we have on hand so we’re certainly actively exploring things. But we don’t have anything to announce at this point and it’s not through want of a willing seller/buyer, the right value and the right strategic fit coming together.
“We have had times in the past few years where we have had several of those things come together at once and other times where we go a stretch without one,” he added.
