McCormick & Company has reaffirmed its earnings guidance after delivering a solid second quarter.
The company said that in the second quarter of 2009, sales declined 1%, but in local currency rose 7%. The increase in local currency was led by a 19% increase in consumer business sales in the Americas, which included 13% of additional sales from the company’s Lawry’s acquisition.
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For the second quarter, earnings per share were US$0.38 compared to $0.41 in the second quarter of 2008. On a comparable basis, excluding the impact of restructuring charges and credits in 2008 and 2009, this was an increase of $0.03.
Higher operating income added $0.06 per share, offset by $0.01 from higher net interest expense and $0.02 from a discrete tax item included in this quarter’s financial results.
In the Americas region, product innovation and marketing activity also led to higher sales of dry seasoning mixes, grilling items and a number of other products, including Easter-related spices and seasonings, the company said.
In local currency, the company grew industrial sales in the Americas with an increase of 6% of which Lawry’s added 2%.
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By GlobalDataSales this quarter in the Europe, Middle East and Africa region (EMEA) were impacted by the difficult economy and the bankruptcy of a primary food service distributor in the UK, McCormick said. “In these markets, the company is increasing coupons and promotions to support the value of its consumer brands and, in response to the bankruptcy, has begun to supply its food service customers directly.
A more favourable sales mix enhanced by the acquisition of strong brands continues to increase profits, however.
Alan D. Wilson, chairman, president and CEO, said: “McCormick continues to achieve solid financial results in a tough economy. Sales growth for our US consumer business was particularly strong this quarter as a result of effective marketing support, the addition of Lawry’s and continued consumer interest in our leading brands. This more favourable business mix, together with CCI, our restructuring programme and other cost reductions, led to profit and margin increases that were right in line with our 2009 objectives.”
He added: “We are effectively navigating through a difficult global economic environment. We were able to manage an unexpected bankruptcy cost this quarter, along with further volatility in raw material costs and foreign currency exchange rates, and still deliver our targeted profit growth.”
Based on the first half, the company reaffirmed its 2009 earnings per share projection of $2.24 to $2.28. This is an increase of 7 to 9% versus 2008 on a comparable basis when the impact of restructuring charges and credits, and unusual items are excluded.
Sales in 2009 are expected to grow 2 to 3%, which is unchanged from prior 2009 guidance.
