US meat and packaged food group Hormel Foods has reported a 4% drop in third-quarter net income from US$59.6m to $57.4m.
The company attributed the decline in profitability to higher pork, beef, chicken and grain costs. However, the results were in line with analysts’ forecasts.
Revenues rose by 8% to $1.52bn. Sales from its refrigerated foods segment, which makes up 54% of group revenues, rose by 9%, the company said, on the back of strong sales of flavoured meat products and frozen meals. Operating profit from the refrigerated food division rose by 23%.
However, operating profit at its Jennie-O Turkey Store division fell by 19%, with volumes down 1% and revenues rising by 4%.
Hormel said the performance of its specialty food segment had been boosted by increased sales of nutritional and ready-to-drink products and higher prices. The company’s Specialty Foods arm saw operating profit rise by 28%, with volumes increasing by 6% and dollar sales up 14%.
“As we previously announced, the higher than expected input costs within the Grocery Products segment pressured profitability more than we anticipated. This caused the company to fall short of the original expectations for the quarter,” said chairman, president and CEO Jeffrey M. Ettinger. “Within the Grocery Products segment, we saw mixed results for the quarter. For example, we had significant distribution gains and sales growth from our Hormel Compleats microwave trays. However, part of this growth was offset from weakness in our chunk chicken and Chi-Chi’s sauce business.”
While disappointed with the overall results, Ettinger said the company was encouraged by the 6% growth in its consolidated segment operating profit lead by strong year-over-year performance in Refrigerated Foods, Specialty Foods and the International division. “We were also satisfied with the progress Jennie-O Turkey Store is making to offset the higher grain input costs through higher pricing. Based on this progress, we expect Jennie-O Turkey Store will meet last year’s fourth-quarter results,” Ettinger said.
For the nine months, net earnings were $200.7m, up from $196.1m a year ago. Nine-month sales rose by 8% to $4.53bn.