News

McCormick bullish

3 Oct 2016

McCormick has reported financial results for the third quarter ended August 31, 2016, saying it continues to expect solid sales growth and raising its projection for earnings per share.

McCormick has reported financial results for the third quarter ended August 31, 2016 and provided its latest financial outlook for fiscal year 2016.

Sales rose 3% in the third quarter from the year-ago period. In constant currency, the company grew sales 6%, with strong results in both the consumer and industrial segments. McCormick increased gross profit margin to 41.6% from 39.8% in the third quarter of 2015. Operating income was $168 million in the third quarter compared to $139 million in the year-ago period. Adjusted operating income was $172 million, a 12% increase from $154 million in the third quarter of 2015.

Earnings per share increased to $1.00 from $0.76 in the third quarter of 2015, mainly due to the increase in operating income and a favourable tax rate. Adjusted earnings per share rose 21% to $1.03 from $0.85 in the third quarter of 2015.

For fiscal year 2016, based on its year-to-date performance and growth momentum, McCormick said it continues to expect solid sales growth and raised its projection for earnings per share.

"Our strong third quarter financial results demonstrate the effective execution of our strategy,” said Lawrence E. Kurzius, President and CEO. “We are driving both sales growth and significant productivity improvements, and expect 2016 to be a record year for McCormick. The efforts and engagement of employees throughout the company are driving this performance.”

"Consumer demand for healthy and high quality flavours continues to grow in markets around the world. In both our consumer and industrial segments, we are meeting this demand with a broad portfolio of on-trend products in our base business, innovative new products and through acquisitions. All of these factors contributed to our third quarter sales increase of 3%, which was 6% in constant currency, and we achieved particularly strong growth in our consumer business in the U.S. and in China. We are balancing these strategies to grow sales with our actions to improve productivity and lower costs. Led by our Comprehensive Continuous Improvement (CCI) program, we expect to achieve cost savings of $100 million to $110 million in 2016. We are investing a portion of these savings in brand marketing and other growth initiatives and also driving greater profitability for our business, as demonstrated by the strong increase in third quarter operating income."

Industrial segment sales were comparable to the third quarter of 2015. However, in constant currency sales rose 4% with increases in each of the company's three regions. Both volume and product mix and pricing actions taken in response to higher material costs, had a favourable impact on sales versus the year-ago period.

Industrial sales in the Americas grew 2% from the year-ago period and in constant currency, the increase was 4%. During the third quarter, the company gained share of branded food service sales in the U.S. and grew sales of snack seasonings and other products in Latin America.

In EMEA, industrial sales declined 7% from the year-ago period. In constant currency sales rose 5%, with increased sales of branded food service products and customized flavour solutions.

Industrial sales in the Asia/Pacific region declined 1%. In constant currency, sales rose 3%. Customer new products and promotional activity contributed to sales growth from the company's operations in Australia and Southeast Asia. In China, sales were unfavourably impacted by a large customer's recent decision to diversify their supply chain with a second supplier.

Industrial segment operating income, excluding special charges, rose 14% to $45 million from $39 million in the year-ago period. In constant currency, adjusted operating income rose 23%. The favourable impact of higher sales and cost savings, more than offset the unfavourable impact of increases in material costs and brand marketing.