In this file:
· Hormel net income meets Wall Street expectations
· Hormel Foods Corp (HRL) Q4 2019 Earnings Call Transcript
· Hormel Foods thankful its turkey business is back
· Hormel builds plant for Columbus charcuterie
· How will African swine fever impact the price of Spam?
Hormel net income meets Wall Street expectations
By: The Associated Press
via Finance & Commerce - Nov 26, 2019
AUSTIN, Minn. — Hormel Foods Corp. on Tuesday reported fiscal fourth-quarter net income of $255.5 million.
On a per-share basis, the Austin, Minnesota-based company said it had net income of 47 cents.
The results met Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was also for earnings of 47 cents per share.
The maker of Spam canned ham, Dinty Moore stew and other foods posted revenue of $2.5 billion in the period, falling short of Street forecasts. Three analysts surveyed by Zacks expected $2.52 billion.
For the year, the company reported profit of $978.8 million...
Hormel Foods Corp (HRL) Q4 2019 Earnings Call Transcript
HRL earnings call for the period ending October 27, 2019.
Motley Fool Transcribers
Nov 26, 2019
Hormel Foods Corp (NYSE:HRL)
Q4 2019 Earnings Call
Nov 26, 2019, 9:00 a.m. ET
Questions and Answers
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Hormel Foods Fourth Quarter 2019 Earnings Release Call. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, November 26, 2019.
I would now like to turn the conference over to Nathan Annis, Director of Investor Relations. Please go ahead, Mr. Annis.
Nathan P. Annis -- Director of Investor Relations
Good morning. Welcome to the Hormel Foods conference call for the fourth quarter of fiscal 2019. We released our results this morning before the market opened around 6:30 AM Eastern. If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section.
On our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer; and Jim Sheehan, Executive Vice President and Chief Financial Officer. Jim Snee will provide a review of each segment's performance for the quarter and our outlook for 2020. Jim Sheehan will provide detailed financial results and further assumptions relating to our outlook. The line will be open for questions following Jim Sheehan's remarks.
As a courtesy to the other analysts, please limit yourself to one question with one follow-up. If you have additional questions, you are welcome to get back into the queue. An audio replay of this call will be available beginning at 11:00 AM today, Central Standard Time. The dial-in number is (888) 220-8451 and the access code is 1340983. It will also be posted to our website and archived for one year.
Before we get started, I need to reference the Safe Harbor statement. Some of the comments made today will be forward-looking and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to Pages 35-41 in our Company's Form 10-Q for the quarter ended July 28, 2019, for more details. It can be accessed on our website.
Additionally, please note the Company uses non-GAAP results to provide investors with a better understanding of the Company's operating performance by excluding the volume and sales impact of the CytoSport divestiture. Discussion on non-GAAP information is detailed in our press release located on our corporate website. Please note that during our call, we will refer to these non-GAAP results as organic volume and organic sales.
I will now turn the call over to Jim Snee.
James P. Snee -- Chairman of The Board, President, Chief Executive Officer
Thank you, Nathan. Good morning, everyone. We have the opportunity to outline our Company's growth strategy at our Investor Day in October. Our 2020 Path Forward, a set of six strategic priorities, sets us up for growth in 2020 and well into the future. The six priorities we presented were, one, growing our Deli and Foodservice businesses. Two, accelerating growth in ethnic cuisine. Three, pursuing both new innovations. Four, expanding our global presence. Five, protecting our core brands. And six, continuing to transform our company through one supply chain and Project Orion initiatives. These priorities represent another step forward for Hormel Foods as a global branded food company.
We made great progress in 2019. Notably, we launched the Hormel Deli Solutions division in Refrigerated Foods, delivered $700 million in sales from our MegaMex joint venture which also celebrated its 10th anniversary. We completed our state-of-the-art whole bird facility at Jennie-O Turkey Store exited two non-strategic businesses, CytoSport and the hog harvest in Fremont, Nebraska, and made tremendous progress on our one supply chain and Project Orion initiatives.
From a financial perspective, we grew organic sales by 1%, improved our cost structure and operating margin, invested over $290 million back into our business with capital projects such as the Burke Pizza toppings facility and an additional Fontanini production line. Raised our dividend for the 54th consecutive year, the 11th consecutive year of double-digit increases. Repurchased $174 million in common stock, the highest annual repurchased in our history. Reduced our long-term debt and grew our cash balance.
From a segment perspective, Refrigerated Foods grew earnings in spite of a 50% decline in commodity profit as our value-added businesses delivered strong growth. The Black Label, Bacon 1, Fire Braised, Natural Choice and Applegate brands were all meaningful contributors to value-added growth.
Grocery Products had a year of mixed results. We grew organic volume and sales for the year driven by brands such as Herdez, Wholly, and Dinty Moore. I'm also really proud to say SPAM had its fifth consecutive year of record sales which is a tremendous accomplishment. However, sales and profits declined for SKIPPY, as we faced deflationary pricing pressure due due to competitive dynamics in the peanut butter category. Our team rallied and did an excellent job using revenue growth management with a number of customers to identify the right pricing and promotional tactics to drive category growth for our customers.
MegaMex continues to generate excellent top line growth. From a bottom line perspective, earnings declined as they lapped a tax benefit and were impacted by higher avocado markets during the year. Jennie-O Turkey Store managed through both industry oversupply and the effects of two lean ground turkey recalls. The fourth quarter proves that the Jenny-O brand remains strong and the additional investment we are making in the business is the right long-term decision. This team clearly has momentum going into 2020.
The full-year results for the International segment were disappointing, as the team encountered numerous challenges stemming from African swine fever in China, the impact from tariffs, and global trade uncertainty. These headwinds greatly mask excellent growth in our China business.
Looking at the fourth quarter, we delivered earnings per share of $0.47, as part our full-year earnings at the top end of the guidance range we provided at our Investor Day in October. Sales decreased 1% on a 2% increase in volume. Organic sales increased 2% on a 1% increase in volume. Three of our four segments, Refrigerated Foods, Grocery Products, and Jennie-O delivered organic volume and sales growth. Total company sales growth was led by brands such as Columbus, Fire Braised, Bacon 1, Natural Choice, Gatherings, SPAM, Herdez, Wholly and Hormel Chili.
Refrigerated Foods grew volume 1% and sales 4%. While many products across retail deli and foodservice contributed to the sales growth, I would be remiss if I didn't call out the growth we are seeing from Bacon 1. The Hormel Foodservice team is doing an excellent job growing Bacon 1 account by account. We also recently introduced the product into the club channel under the brand Hormel Thick Cut Reserve. The recent expansion at our facility in Wichita, Kansas. is providing the necessary runway to continue growing this important business.
Strong earnings growth from our value-added businesses was not able to overcome a 46% decline in commodity profits leading to a Refrigerated Foods segment profit decline of 3%.
Grocery Products volume declined 9% and sales declined 10% due to the divestiture of CytoSport. Organic volume increased 2% and organic sales increased 1%. Center store brands such as SPAM and Herdez drove sales and earnings growth. Lower pricing on SKIPPY peanut butter remained a headwind this quarter. Jennie-O Turkey Store volume increased 5% and sales increased 3%, primarily due to whole bird and commodity sales increases. Segment profit increased 6% due to operational improvements across their supply chain.
As expected, we are regaining distribution on our most important item, lean ground turkey. We recently gained distribution back at a large customer, but still have work to do in order to get back to our pre-recall distribution levels. Advertising and promotional activities in select key markets also helped drive growth during the quarter. It's important to note this quarter represents the first time since the fourth quarter of 2016 that we grew volume, sales and segment profit at Jennie-O Turkey Store.
International volume sales and segment profit declined dramatically during the quarter. We saw weakness in our export sales and in our Brazil business due to higher protein prices. We are taking the necessary pricing actions to offset these cost increases.
From a total company perspective, we expect to deliver sales growth in excess of our 2% to 3% organic sales growth goal in fiscal 2020. Two key drivers to sales growth across the company are innovation and e-commerce. First, we continue to see innovation successes across our business and remain confident as we close in on the final year of our 15% by 2020 challenge. The percentage of sales from products innovated in the last five years has grown just under 15%. Products such as Natural Choice snacks, stacks and wraps, Herdez Guacamole Salsa, the Applegate Blend Burger and SKIPPY PB & Jelly Mini are all important initiatives help us achieve our 15% goal.
Second, our e-commerce capabilities continue to improve especially for the online grocery pick-up segment. Through our efforts in analytics, package optimization, and customer expansion, we see another year of strong double-digit growth for e-commerce. We expect to deliver another year of operating income growth in 2020. The biggest risk factor continues to be the impact African swine fever could have on our business. While we have seen volatility in the market, we have not seen a major and sustained increase in pork cost as we and much of the industry expected. A combination of higher domestic pork production, higher levels of cold storage in China, and presumably lower Chinese consumer demand are factors keeping prices in check. Jim Sheehan will provide more details related to our market outlook.
We are still very confident in our ability to manage through ASF. First, we are very optimistic about the demand for our products, whether from an up and coming regional pizza chain using our Hormel Pizza toppings, a deli consumer looking from our premium short cookery items like Columbus Craft meat or a family looking for affordable and versatile protein like our SPAM family of products.
Second, we hold leadership positions in many of the categories in which we compete. That affords us the ability to be pricing leaders when market conditions warrant. We demonstrated our ability to pass higher pricing during PEDv in 2014 and again during the market run up in 2017. As a global branded food company and a leader in the industry, we believe it is our responsibility to lead in these situations.
Finally, we expect input cost volatility to persist into fiscal 2020. As a net buyer of protein, major market swings can shift profits from quarter to quarter when our pricing lags the market.
Looking at the segments for 2020, we expect three of our four business units to show sales and profit growth, with the exception being Grocery Products, as they lap the CytoSport divestiture for the first half of the year. We do however expect sales and segment profit growth for the rest of the Grocery Products segment led by center store brands such as SPAM, Dinty Moore, and SKIPPY. We also expect growth from MegaMex and remain extremely confident in our ability to continue growing the Herdez and Wholly brands. I am excited by the authentic and innovative products they are bringing to the marketplace such as Herdez Refrigerated Guacamole, Herdez Taqueria Street Sauces, and Wholly Smashed Avocados.
We expect 2020 will represent a return to growth for Jennie-O Turkey Store. A clear focus on regaining lost lean ground turkey distribution, the efforts to realign our cost structure and slowly improving industry fundamentals gives us confidence we will get this business back in growth mode.
International is expected to show sales and segment profit growth in 2020, however, we do expect volatility as we manage higher input costs in China and Brazil, in addition to short-term noise related to an uncertain global trade picture. Again, this year, we expect Refrigerated Foods will grow sales and profits led by many brands across Foodservice, Retail and Deli. I have a high level of confidence in this team's ability to execute in the marketplace and continue to grow branded value-added profit.
At Investor Day, we highlighted the great work happening within our supply chain group, and I'm pleased to report we achieved our $75 million cost savings goal this year. We also highlighted our long-standing key result of holding controllable cost increases to less than 1% over the prior year. While large investments can impact a single year, we have specific targeted actions to improve our cost structure over time. Achieving our 1% key result implies savings in 2020 of approximately $75 million, similar to 2019.
Taking all these factors into account, we are setting our full-year earnings guidance at $1.69 per share to a $1.83 per share. And our sales guidance at $9.5 billion to $10.3 billion. Our expected fiscal 2020 organic pre-tax earnings growth rate is in line with our near-term goal of 5% to 7% organic pre-tax earnings growth we outlined at our Investor Day. As a reminder, CytoSport earnings in 2019 contributed $0.10 to earnings per share. We also expect a higher effective tax rate in fiscal 2020.
At this time, I will turn the call over to Jim Sheehan to discuss our financial information relating to the quarter and key assumptions for fiscal 2020.
James N. Sheehan -- Chief Financial Officer, Executive Vice President ...
Hormel Foods thankful its turkey business is back
Kristen Leigh Painter, Star Tribune
via The Detroit News (MI) - Nov. 26, 2019
Two days before Thanksgiving, Hormel Foods Corp. is giving thanks its turkey business is back.
Hormel’s latest quarterly results, announced Tuesday, showed Jennie-O Turkey Store grew volume, sales and profit for the first time since early 2016.
The business, which is the nation’s second-largest turkey brand, had struggled over the last few years through challenging market conditions and two product recalls that damaged its relationship with retailers. Jennie-O recently won back space in some key retailers who had cut their distribution following two recalls of ground turkey before Thanksgiving and Christmas last year.
“We feel (Jennie-O) has so much momentum going into 2020,” Jim Snee, Hormel’s chief executive, said. “But we still have work to do to get back to our pre-recall levels.”
The company’s cautiously optimistic outlook for Jennie-O, which accounts for about 15% of Hormel’s overall sales, was a bright spot in the fiscal fourth quarter that ended Oct. 27.
Hormel’s profit fell 2% to $255 million. That amounted to 47 cents a diluted share, beating analysts’ expectations by a penny.
Revenue fell about 1%, with gains in some products offset by the impact of the sale of its CytoSport drinks to PepsiCo earlier this year.
For the new fiscal year, executives at Hormel forecast sales growth of around 4% but little change to its per-share profit. In a statement, they cited ongoing global trade uncertainty, “higher protein prices and further volatility related to the impact from African swine fever.”
That illness has devastated hog farms in China, the world’s largest consumer of pork, and has spread to Vietnam and the Koreas. Its effects are rippling through pork prices around the world.
Even before the 2018 ground turkey recalls, Jennie-O endured several years of challenging market conditions created by the avian flu outbreak of 2015. That health scare led many growers to overcompensate for their flock losses, creating a market oversupply that depressed prices.
Now, those fundamentals are starting to stabilize...
Hormel builds plant for Columbus charcuterie
By Dean Best, Just-Food
27 November 2019
US group Hormel Foods is to invest in the production of charcuterie products sold in its domestic market.
Hormel is building a facility in Nebraska for dry-sausage products for charcuterie marketed under the Columbus brand. The company's charcuterie products are "predominantly" manufactured in California.
"The plant will allow us to continue expanding distribution of Columbus products to the East Coast. Construction is already underway, and we expect the new facility to be operational in early fiscal 2021," Hormel chairman, president and CEO Jim Snee said in a statement yesterday (26 November).
Speaking to just-food, a spokesperson for Hormel said: "We are seeing nice growth in Columbus Craft Meats products, particularly the grab-and-go products and consumers are gravitating towards more premium products like charcuterie. As we continue to expand distribution, this plant is perfectly positioned to allow us to continue that growth."
Hormel is spending around US$140m on the project. Another capital investment in progress is the expansion of a plant in Nevada - run by Hormel subsidiary Burke Marketing Corp. - which makes pizza toppings and cooked meats for the restaurant and foodservice sectors.
"The key message to remember here, with both of these projects, is that they're supporting our value-added growth," Snee said on a conference call with analysts yesterday to discuss Hormel's fourth-quarter and annual results...
How will African swine fever impact the price of Spam?
Hormel Foods has been pleased with the popularity of its Spam products. However, will the current African swine fever outbreak have an impact on its price?
Roy Graber, WATT AgNet
November 26, 2019
I’ve had a number of conversations regarding the outbreak of African swine fever (ASF) in China and its possible impact on the supply, demand and price of pork, as well as competing proteins like chicken, turkey and beef.
I’ve also had numerous discussions about ASF’s potential on grain markets, specifically on key feed ingredients like corn and soybeans.
Yet, after months of ASF being a hot topic, I never until today heard anybody ask how the disease outbreak will affect the price and popularity of Spam. Granted, Spam is a pork-based product, but let’s face it, when someone says, “let’s have pork for supper,” you don’t walk over to the kitchen cupboard and reach for a can of Spam.
Spam, for all intents and purposes, is its own food category. After all, how many meat-based foods could sell out of a limited edition rollout of a pumpkin spice flavored product within a matter of hours?
Hormel Foods, the parent company of Spam, held its earnings call for the fourth quarter of fiscal year 2019 on November 26. During that call, Hormel Chief Executive Officer Jim Snee and Chief Financial Officer Jim Sheehan on several occasions mentioned potential impacts of the ASF outbreak.
Also, during the course of the call, Snee also spoke of how well sales of Spam have been going, not only in the United States, but also in China.
When it came to the question-and-answer portion of the call, one analyst had to tie the two subjects together.
So will the price of Spam go up?
“At a high level of ASF, we fully understand the scenario that results in higher prices. We talked a lot about our ability to price in the event that we see a larger scale or bigger impact ASF event, whether that’s domestically or in our business in China,” said Snee. “The Spam brand is a brand that has probably some of our strongest pricing power.”
Snee said Hormel Foods did take Spam pricing this year...