McCormick & Co. sees strong fiscal 2017 results carrying over to '18

by Keith Nunes
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McCormick products
McCormick exceeded each of its key financial targets during fiscal 2017.
 

SPARKS, MD.  – McCormick & Co. Inc. exceeded each of its key financial targets, including sales, operating income and earnings per share, during fiscal 2017, ended Nov. 30. A combination of favorable market conditions, returns from acquisitions, and maintaining a focus on cost savings all contributed to a strong performance during the year.

Net income for the 12 months totaled $477.4 million, equal to $3.77 per share on the common stock, an increase compared with the previous year when the company earned $472.3 million, or $3.73 per share.

Sales for the year rose to $4,834. 1 million from $4,411.5 million the year prior.

Lawrence Kurzius, McCormick
Lawrence Kurzius, chairman, c.e.o. and president of McCormick

“… We achieved growth rates that exceeded each of our long-term financial goals, which are to grow sales 4% to 6%, adjusted operating income 7% to 9%, both in constant currency, and to grow adjusted earnings per share 9% to 11%,” said Lawrence E. Kurzius, chairman, chief executive officer and president of the company, during a conference call with analysts on Jan. 25. “We drove a 10% constant-currency sales growth with the incremental sales from our acquisitions of RB Foods, Giotti and Gourmet Garden contributing 6% of this growth. I'm pleased to highlight that our base growth was up 4%, which is within our long-term objective even without the benefit of acquisitions.”

Consumer Segment sales rose to $2,970.1 million during the year while Industrial Segment sales rose to $1,864 million.

Franks Red Hot, RB Foods, McCormick
McCormick completed its acquisition of Reckitt Benckiser’s food business last August.
 

“Our consumer segment sales grew 8% in constant currency, led by the RB Foods and Gourmet Garden acquisition impacts as well as base business increases driven by the U.S. and China,” Mr. Kurzius said. “Constant-currency sales growth in our Industrial Segment was an exceptional 14%, with RB Foods and Giotti driving 8 percentage points.”

In his comments, Mr. Kurzius specifically highlighted the performance of the company’s Industrial Segment, which he called “broad-based” and “strong.”

“Our range of flavor solutions for our industrial customers is one of the broadest in the industry, as evidenced by product development that has been the significant driver of our 2017 industrial sales growth,” he said. “As our customers move their portfolios toward natural, organic, clean label and better for you, they want to ensure that taste is not compromised. Our distinctive food-first approach, our deep understanding of food and the use of natural ingredients competitively differentiates us and is valued by our customers. 

Gourmet Garden, McCormick
McCormick acquired Gourmet Garden in April 2016.
 

“Along with our innovations, our customer intimacy is driving growth. For instance, as of 2017, we have won global flavor supplier status with nine large packaged food and beverage companies, an increase of six companies over the last three years. We continue to win with new and existing industrial customers, and it is across all categories and applications. “

Michael Smith, McCormick
Michael Smith, c.f.o. of McCormick

In fiscal 2018, the company expects sales growth in the range of 12% to 14% and adjusted earnings per share to be in the range of $4.80 to $4.90 (adjusted earnings per share were $4.26 in fiscal 2017), said Michael R. Smith, chief financial officer.

Driving the company’s guidance is the incremental impact of the RP Foods acquisition, which is estimated to add approximately 8% to sales growth. The remaining increase will be driving by higher volume and product mix, Mr. Smith said.

“In 2018, we will also continue to drive growth globally through e-commerce, including pure play, brick-and-mortar customers and direct-to-consumer,” Mr. Kurzius said. “We’ll be making further investments to drive content, expanding resources to support acceleration in developing programs and items tailored to this channel. I’m also pleased to share that just a few days ago, we’ve launched our direct-to-consumer e-commerce platform in China.  

Giotti Flavors, McCormick
McCormick agreed to acquire Enrico Giotti SpA in November 2016.
 

“Across our Industrial Segment, the migration of our portfolio to more technically insulated and value-added categories will continue in 2018 with the opportunities gained from the Giotti acquisition, the rapid growth across other flavor categories such as in savory products, and in branded food service, we also expect to realize further results against this strategy, including the impact of Frank’s RedHot and French’s and our branded food service business.”

Mr. Smith added, “Our results reflect the effective execution of our balanced strategy to drive both sales and profit realization, combined with the engagement of our employees around the world. Our performance continues to give us confidence in the momentum of our business and that we will have another successful year in 2018.” 
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