US spice maker McCormick & Co. booked higher first-half profits today (30 June) on the back of improved gross margins and higher sales.
The company said operating income increased to $254.1m in the first six months of the year, up from $197.5m last year. Net income totalled $187.2m, versus $154.8m in the comparable period of last year.
The group’s performance was boosted by improved gross margins on lower cost of goods sold and lower special charges.
President and CEO Lawrence Kurzius said McCormick “significantly” improved its gross profit margin. He said: “Led by our comprehensive continuous improvement (CCI) program, we are improving productivity and lowering costs throughout the company. We are making great progress toward our four-year goal to achieve $400m of cost savings by 2019, and have increased our cost savings goal for 2016 to a range of $100-110m. These cost savings are driving margin improvement and are our fuel for growth, providing the funds for higher brand marketing, product development and acquisitions.”
The company revealed net sales grew to $2.09bn from $2.03bn as it was able to shrug off the drag of foreign exchange.
“Underpinning our growth is the rise in consumer demand for healthy flavour and high quality products, and we are meeting this demand with an expanding portfolio of on-trend products. In the second quarter, we introduced a number of new products and were pleased to expand our portfolio with the acquisition of Gourmet Garden, a leader in chilled, convenient herbs,” Kurzius said.
Looking to the full year, McCormick said it expects to grow sales 1% to 3%. Excluding the estimated impact of unfavourable currency rates, the projected growth rate is 4% to 6%.
Operating income is expected to grow 16% to 19% from $548m in 2015. This range includes the impact of estimated special charges, which are now estimated to be $11m in 2016 compared to $66m in 2015. Excluding special charges, the company reaffirmed its forecast to grow adjusted operating income 6% to 8% from adjusted operating income of $614m in 2015.