McCormick profits rose 8.5% in third quarter

September 21, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

Despite falling profit margins in its industrial business and a drop in Mexican sales, McCormick & Co. Inc. boosted profits by 8.5 percent in its fiscal third quarter with increased retail sales in the United States and Europe.

"We were able to get the profit we wanted because the sales were up," said Robert G. Davey, vice president and chief financial officer for the Sparks-based spice and flavorings company. "We are pleased with the quarter we had."

Sales for the quarter that ended Aug. 31 were up 6.9 percent, increasing to $422.1 million from $394.9 million in the same period a year ago. Profits in the quarter were $26.4 million, compared with $24.4 million a year ago. Earnings per share rose to 33 cents, from 30 cents.

For the nine months, the world's largest spice company had net income of $63.9 million, or 79 cents a share, on sales of $1.2 billion. For the same period a year ago, McCormick had net income of $32.5 million, or 39 cents a share, on sales of $1.1 billion.

The previous nine-month results included a charge of $26.6 million, or 33 cents a share, for a noncash accounting rule change. Excluding that charge, net income increased 8.0 percent for the period.

Despite the profit increase, earnings were held down by lower profit margins in the company's industrial and commercial business, a slump in retail sales in Mexico and higher interest rates.

But Mr. Davey said these conditions should improve as the company works with large customers to improve profit margins and Mexico's economy picks up after its recent election.

"We do see an improvement in margins in the industrial business next year," he said.

McCormick stock, once high-flying, has been slipping in the last two years as the company has failed to meet its stated goal of a 15 percent annual increase in profits. The stock price has dropped from $28.50 a share in November 1992 to yesterday's closing price of $18.625, up 12.5 cents from Monday's closing price.

If the company is able to improve margins and the Mexican business revives, the stock market may follow, Mr. Davey said.

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