The maker of Spam canned meat and Jennie-O Turkey Hormel Foods has said that its first quarter profits climbed 8.7%, despite a steep increase in grain prices that dented turkey profits.
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The Austin, Texas-based company posted earnings of US$75.3m, or $0.54 per share, for the quarter, up form $69.3m reported for the comparable period of last year.
Revenue rose 6.2% to $1.5bn, up from $1.42bn last year.
Jennie-O Turkey profits dropped 25% year-on-year, declining to $30m in spite of a 4% increase in sales. Hormel has been looking to increase its value added income, with new product launches in its turkey business including turkey burgers and rotisserie.
The unit, which had previously been Hormel’s most profitable division, was hurt by increased grain prices, the company said. Hormel added that it hoped to off-set these increased costs through price rises and continued growth of its value added sales.
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By GlobalData“The sharp rise in grain markets has added a new dynamic to our business and to the food industry in general. We anticipate higher grain costs will continue to burden our turkey operation and we are working hard to find ways to offset this extra expense,” said chairman and ECO Jeffrey M Ettinger.
Profits in the company’s refrigerated foods business increased 8% to $41.9m, while specialty foods operating profit rose 75% and sales of grocery products jumped a more modest 1%.
Hormel reiterated its 2007 EPS guidance of $2.15-$2.25, stating that it expects to earn $0.47-$0.53 per share during the second quarter.
