McCormick stock trails earnings

March 17, 1994|By Joel Obermayer | Joel Obermayer,Sun Staff Writer

McCormick & Co. Inc.'s annual meeting yesterday came on the heels of strong first-quarter earnings announced earlier this week, but McCormick executives were not in a self-congratulatory mood, largely because the company's stock has not kept pace.

"Obviously we aren't happy with it," said Chairman and Chief Executive Officer Bailey A. Thomas in his opening remarks.

The company's stock, which started January at $24.25, has languished this year. Yesterday McCormick stock closed at $23, up 50 cents a share.

Later, Mr. Thomas said the stock price had not risen due to a general malaise that is affecting food stocks.

"Food stocks are not drawing the premiums they once were," he said.

Food company stock prices have been lagging over the past year as competition from generic product makers has forced major brand producers, such as food and tobacco conglomerate Philip Morris Cos., to cut prices to retain market shares.

Executives at the Hunt Valley spice and food products company said that an increasingly competitive climate, particularly domestically, limited profit growth in 1993 to 12 percent and would probably hold profit growth below the company's target of 15 percent this year as well.

The company's first-quarter profits this year grew 6.4 percent to $18.3 million, excluding a one-time charge for retiree benefits in last year's period. Yesterday, the company declared a quarterly dividend of 12 cents per share.

"We do believe that double-digit earnings growth is attainable in 1994," said James A. Hooker, the company's chief financial officer.

The company's strategy is to boost its stock through earnings growth, primarily in international markets, and to cut the production cost of its goods by 10 percent over four years. Company President Gene Blattman said that the company last year reached its target of cutting costs by 3 percent.

Mr. Blattman said the company would continue to reduce costs by looking for cheaper global sources of spices, by convening teams of employees to look for ways to become more efficient and by investing in more efficient production machinery.

Company executives said the firm had strong growth opportunities in China, Indonesia, Mexico and Latin America.

Sales at the company's joint ventures, including many of its operations abroad, increased by 16 percent, to $310 million, in 1993.

Southeast Asia is particularly promising, Mr. Thomas said, because consumers there are used to eating spicy food.

"Consumers in Asian-Pacific countries already know how to use and enjoy spices," he said. "Since they have no strong national brands, we have the chance to build new business from the ground up."

The company recently concluded a joint venture agreement to market a line of retail products in Indonesia. The company plans to build a production plant in southern China.

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