McCormick has reported financial results for the first quarter ended February 29, 2016 and provided its latest financial outlook for fiscal year 2016.Sales rose 2% in the first quarter from the year-ago period. In constant currency, the company grew sales 7%.
McCormick has reported financial results for the first quarter ended February 29, 2016 and provided its latest financial outlook for fiscal year 2016.Sales rose 2% in the first quarter from the year-ago period. In constant currency, which excludes the unfavourable impact of foreign currency, the company grew sales 7%, with strong increases in both its consumer and industrial segments.Earnings per share were $0.73 in the first quarter of 2016. Excluding the impact of special charges, adjusted earnings per share were $0.74 compared to $0.70 adjusted earnings per share in the first quarter of 2015. This increase was mainly due to higher sales and improved gross profit margin.For the 2016 fiscal year, the company adjusted its financial outlook as it now expects a lower impact from unfavourable foreign currency exchange rates. Excluding this impact, the company reaffirmed its expected growth rate for sales, adjusted operating income and adjusted earnings per share. "McCormick's first quarter results were a great start to fiscal year 2016,” said Lawrence E. Kurzius, President and CEO. “Consumer demand for healthy flavor and high quality products is increasing globally and we are meeting this demand with a growing portfolio of on-trend products. Each of our two segments achieved strong underlying sales increases driven by our growth strategy. We are growing base business sales with brand marketing and are launching differentiated new products such as herb grinders and slow cooker sauces for our consumer segment and snack seasonings for industrial customers. We had an incremental sales benefit from three acquisitions completed in 2015, and continued to expand the availability and footprint of our business through retail channels and with new industrial customers.”"Led by our Comprehensive Continuous Improvement (CCI) program, we are on-track to deliver at least $95 millionof cost savings in 2016 and recently announced a goal to reach $400 million of cost savings in the next four years. Together with our strategies to drive sales growth, these cost savings are driving higher gross profit margin and in the first quarter, led to a double-digit increase in adjusted operating income on a constant currency basis. I want to recognize McCormick employees around the world for their efforts and engagement. Together, we are focused on building value for our shareholders and customers and are pleased with the momentum underway in 2016."Operating income was $129 million in the first quarter compared to $94 million in the year-ago period. The company recorded $2 million of special charges in the first quarter of 2016 related to previously announced organization and streamlining actions. Excluding special charges, adjusted operating income was $131 million compared to $122 million of adjusted operating income in the year-ago period. In constant currency, adjusted operating income rose 12%, with the favorable impact of higher sales and cost savings more than offsetting higher material input costs and increased employee benefits expense.The company plans to grow sales 4% to 6% in constant currency, driven by base business increases, new products, pricing and acquisitions completed in 2015. Including the estimated impact of unfavorable currency rates, projected sales growth is 1% to 3%. The company continues to expect at least $95 million of cost savings to lead to improved margins and fuel an increase in brand marketing of approximately $20 million.Operating income is expected to grow 17% to 20% from $548 million of operating income in 2015. Adjusted operating income is expected to grow 6% to 8% from operating income of $614 million in 2015. Projected adjusted operating income in 2016 excludes an estimated $7 million of special charges that relate to previously announced organization and streamlining actions, and adjusted operating income in 2015 excludes $66 million of special charges. The projected year to year increase in adjusted operating income is 9% to 11%, excluding the estimated impact of unfavorable currency rates.