US food company McCormick & Co. has reported a fall in first-quarter profits after being hit by foreign exchange, costs from reorganising its operations and higher raw material costs.
However, shares in the spice supplier rose as it held its forecasts for adjusted earnings, adjusted operating income and constant-currency sales growth.
For the period ended 28 February, McCormick reported net profit of US$70.5m compared with $82.5m for the same period a year earlier. Operating income was also lower at $93.7m versus $124.6m the previous year.
Sales, however, were up 2% on a year earlier at $1.01bn.
"Although we grew sales in the first quarter, operating income was unfavourably impacted by several factors including special charges, unfavourable currency rates and higher material costs," chairman and CEO Alan Wilson said.
"We anticipate that these headwinds will continue in 2015, but expect the benefit of our pricing actions and cost reduction efforts to build in the upcoming quarters. Employee teams throughout the company are engaged in this activity and we expect to deliver at least US$85m of cost savings in 2015. We continue to generate strong cash flow and are off to a great start this year with US$96m in cash flow from operations. Based on our first quarter performance and our latest 2015 outlook, we expect to deliver another year of solid underlying growth in sales and profit for McCormick shareholders," he added.
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The company adjusted its outlook on reported earnings per share. It had previously expected to deliver reported earnings per share of $3.41 to $3.48. It now expects reported earnings per share of $3.28 to $3.35.
On a reported basis, operating income is now expected to be between flat and up 2% from operating income of $603m in 2014. The new forecast is down two percentage points from the previous projection due to an increase in the estimated impact of both currency rates and special charge, McCormick said.
However, McCormick maintained its forecast for adjusted earnings per share of $3.51 to $3.58. It also said in constant currency, adjusted operating income is expected to grow 6% to 7% from adjusted operating income of $608m in 2014.
The company continues to expect 4% to 6% sales growth in constant currency despite foreign exchange now expected to eat further into sales on a reported basis.
Shares in McCormick were up 5.16 at $76.98 at 09:39 ET.