McCormick & Company profit slips in second quarter

by Eric Schroeder
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SPARKS, MD. — Net income at McCormick & Company, Inc. in the second quarter ended May 31 was $78.6 million, equal to 60c per share on the common stock, down 2% from $80.4 million, or 61c per share, in the same period a year ago. Net sales were $1,002.6 million, up 2% from $984 million.

“In the second quarter of 2013, we grew sales for our consumer business 5% in local currency, led by product innovation, brand marketing support and distribution gains,” said Alan D. Wilson, chairman, president and chief executive officer. “We are getting good returns on our investments to grow this business, and we plan to increase our investment in marketing support approximately $15 million in the second half of the year. Our industrial business grew sales to food manufacturers and food service distributors in the second quarter. While we had lower demand from quick-service restaurants in North America and China, we expect this situation to improve in the fourth quarter based on our new product pipeline and latest outlook.

“McCormick employees around the world are executing well behind our sales growth initiatives, as well as productivity improvements through our Comprehensive Continuous Improvement (CCI) program, which we now expect to deliver at least $50 million in cost savings. CCI is our fuel for growth, providing the funds for investments in product development and brand marketing. We are also growing our business through acquisitions. An important milestone in this initiative was the addition of WAPC in May 2013, which is our first acquisition in China. The integration of this business is well under way, and we expect this business to increase our sales in this attractive market by approximately 60%.”

Operating income in the company’s Consumer Business totaled $87.6 million in the second quarter on sales of $591 million. The results compared with income of $88.6 million and sales of $568.8 million in the same period a year ago.

McCormick said consumer sales in the Americas increased 5%, driven mostly by volume and product mix.

“Initiatives driving this unit growth included consumer marketing, promotional activity and in-store merchandising for spices, herbs and seasonings in both the U.S. and Canada,” the company said. “In addition, product innovation led to increased sales that included new grilling items and Zatarain’s brand products.”

Operating income within the Industrial Business fell 13% during the second quarter to $28.4 million from $32.7 million. Sales also were lower, falling 1% to $411.6 million from $415.2 million.

McCormick said industrial sales in the Americas declined 1%, with minimal impact from currency during the second quarter of fiscal 2013.

“The majority of the decline in volume and product mix related to lower demand from quick-service restaurants in the U.S.,” the company said. “McCormick grew sales of snack seasonings and other flavors to food manufacturers in the U.S. and Mexico and grew sales of branded products to food service distributors in the U.S. A number of new items developed for industrial customers in the Americas are expected to drive sales growth in the fourth quarter of 2013.”

For the first six months of fiscal 2013, overall net income was $154.6 million, or $1.17 per share, down slightly from $154.9 million, or $1.17 per share, in the same period a year ago. Net sales increased 2% to $1,936.9 million from $1,890.7 million.

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