McCormick & Co. has withdrawn its full-year financial guidance as the US-based spices and sauces maker said first-quarter sales were pressured by the coronavirus outbreak.
The New York-listed business said the negative impact on sales from Covid-19 in the three months ended 29 February amounted to 3%, but added the company is “well-positioned” to deal with the crisis due to its “stable cash generation and access to liquidity”.
Lawrence Kurzius, McCormick’s chairman, president and chief executive, said: “The global impact of Covid-19 continues to evolve daily. McCormick’s deepest sympathies go out to all who are affected by Covid-19 and we thank all those working to keep people safe through this crisis.
“At McCormick, we’re committed to maintaining critical food supply across all of our markets and supporting our communities. We are working through the challenges of today, while keeping our focus on the long-term goals, strategies and values that have made us so successful.”
McCormick’s first-quarter net sales dropped 2% to US$1.21bn, and were down 1% in constant-currency terms. “Both comparisons include a reduction to sales growth of 3%, compared to the first quarter of last year, related to the impact of the Covid-19 outbreak in China,” it said.
The Maryland-based company is withdrawing its guidance “due to the rapidly-evolving situation and the high degree of uncertainty relating to the impacts of Covid-19, including on consumer demand across all channels and the global economy”. It hopes to resume guidance when McCormick issues its next results in June.
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Looking ahead, McCormick added it expects sales to increase in its consumer segment as a result of panic buying and as more people eat at home because of government-imposed restaurant closures which have impacted the foodservice channel.
It continued: “While the first quarter China impact of Covid-19 was significant to results, the company believes it cannot extrapolate the overall impact for the rest of the company due to differences related to lockdown durations and pantry stocking, as well as the differing percentages of foodservice business and other dynamics in each region.”
Elsewhere in the first-quarter metrics, McCormick’s operating income fell 1.5% to $194m, and on an adjusted basis was down 2%, including a 10% “unfavourable” impact from lower operating income in China related to Covid-19.
Net income decreased 2% to $144.7m.
CEO Kurzius added: “We are well-positioned given our solid financial results, stable cash generation and access to liquidity, and have rapidly implemented appropriate mitigation plans. Our immediate priorities include ensuring the health and safety of our employees, maintaining the quality and integrity of our products and keeping our brands and our customers’ brands in supply.
“We plan to emerge strong from this event through driving our long-term strategies and reacting with agility to changing consumer behaviour and capitalising on opportunities from our relative strength.”