Skippy Acquisition Helps Boost Hormel Profits By 19%

Profits are up in nearly all of Hormel’s major businesses, and its international market saw a huge jump, due in part to the acquisition of the Skippy peanut butter brand early this year.

Hormel announced Tuesday that its fourth-quarter profits were up nearly 20 percent, driven by growth in its international markets and the acquisition of the Skippy product line.
 
The Austin-based food company purchased the Skippy peanut butter brand in January from Englewood Cliffs, New Jersey-based Unilever United States, Inc., for $700 million. The brand helped drive the company’s grocery product profits up 17 percent and its international business profits up 82 percent.
 
“We broadened our portfolio with the addition of the iconic Skippy brand, providing our team another excellent platform for innovation across many categories,” President and CEO Jeffrey Ettinger said in a statement. “We continued to execute our value-added growth strategy this year with successful new product launches, including our new Hormel Rev snack wraps in the retail space and Hormel Fire Braised meats in the foodservice channel.”
 
Hormel announced that net earnings for the fourth quarter, which ended October 27, totaled $157.3 million, or $0.58 per share, up 19 percent from $132.6 million, or $0.49 per share, during the same period in 2012. Earnings per share were $0.04 higher than what analysts polled by Thomson Reuters had expected.
 
Revenue, meanwhile, totaled $2.32 billion, up 7 percent from $2.17 billion in the fourth quarter of 2012. Fourth-quarter revenue was higher than analysts’ projections of $2.3 billion.

 
In addition to gains in the company’s grocery and international markets, its refrigerated foods segment saw increased profits of 30 percent, and its Jennie-O Turkey Store brand saw profits up 25 percent. Its specialty foods segment profits, however, fell 34 percent due largely to the expiration of an agreement that allowed Cargill’s Diamond Crystal Brands to sell Hormel’s Splenda brand sweetener into the foodservice trade.
 
Shares of Hormel’s stock were trading up about 5.9 percent at $44.94 during Tuesday afternoon trading.
 
The company also announced a $0.12 per share increase to its annual dividend, an 18 percent jump, to $0.80 per share. Hormel said this is the 48th consecutive year it has increased its dividend to shareholders.
 
Hormel’s revenue totaled $8.75 billion for its full fiscal year, up 6 percent from $8.23 billion in 2012. It reported annual profits of $526 million, up about 5 percent from $500 million in 2012.
 
Hormel is confident that it will continue to see growth throughout its 2014 fiscal year and set its earnings guidance for the year between $2.17 to $2.27 per share, which would be an increase from $1.95 in this year. Analysts project fiscal 2014 earnings of $2.24 per share.
 
“We expect to deliver continued sales and earnings growth in fiscal 2014,” said Ettinger. “We expect to benefit from lower grain and turkey commodity costs, while high beef input costs and uncertainty of hog supplies may offset some of those gains headed into the new year.”
 
Ettinger, who joined Hormel in 1989 and became CEO in 2005, was recognized in September as one of four winners of the 2012 “Responsible CEO of the Year” award, presented annually by Corporate Responsibility magazine.