McCormick stuck to adjusted earnings forecasts

McCormick stuck to adjusted earnings forecasts

McCormick & Co. today (29 June) revised its forecasts for annual operating income and earnings per share as the US spices and sauces group takes on the cost of implementing a programme designed to help it become a bigger business.

The Schwartz and Lawry's owner upped its forecast for annual sales - after reassessing the impact exchange rates could have on its top line - and stuck to its estimates for adjusted full-year profits.

However, the company said the cost of its McCormick Global Enablement programme would weigh on the growth of its reported operating income and earnings per share in 2017.

Chairman, president and CEO Lawrence Kurzius said: "We have embarked on our McCormick Global Enablement initiative and will be changing our global processes, capabilities and operating model over the next three years to build a scalable platform for future growth."

In March, McCormick has forecast its annual reported operating income would rise 9-11% in 2017. It is now expecting its reported operating income to grow 8-10% in 2016 from US$641m a year earlier. Due to the new "enablement" programme, the company is now forecasting "special" charges of $11-20m this year. McCormick is finalising the details of its operating model but said the expected cost to implement the programme will be around $55-65m of special charges over the course of the three-year programme. It said the scheme will generate savings of around $30-40m a year once fully implemented. 

Excluding the impact of special charges, the company still expects to grow its adjusted operating income by 8-10% in 2017 from $657m in 2016. Excluding the estimated impact of unfavorable currency rates, that growth rises to 9-11%.

In March, McCormick projected its 2017 earnings per share would land in the range of $3.98 to $4.06, compared to $3.69 of earnings per share in 2016. Excluding special charges, the company forecast adjusted earnings per share of $4.05 to $4.13, up 7-9% on the year.

Today, McCormick forecast annual earnings per share of between $3.94 to $4.02. The company reaffirmed its projected adjusted earnings per share of $4.05 to $4.13.

The revised forecasts came alongside the publication of McCormick's first-half financial results, which included higher net sales, operating income and net income.

The Ducros owner posted net sales of $2.16bn for the six months to the end of May, up from $2.09bn a year ago. McCormick reported higher sales from its consumer business in the Americas and Asia-Pacific, although the division saw sales fall in the EMEA region.

McCormick booked first-half operating income of $266.8m, against $254.1m a year earlier.

The group's net income stood at $193.5m, against $187.2m in the first half of its 2015/2016 financial year.