McCormick in the black after '96 quarter's loss Sparks firm reports $20.2 million profit

September 18, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

McCormick & Co. Inc. yesterday reported net income for the quarter of $20.2 million, a huge improvement from a year-ago loss of $24.3 million due to restructuring charges.

The Sparks-based spice giant credited improvement in several businesses for the third-quarter performance, which also included a 4 percent increase in sales, to $423 million.

"We are particularly pleased with the continued growth of our industrial and food service businesses, the profit improvement of our packaging operations, and the progress we have made in implementing programs to grow our consumer business,` said Robert J. Lawless, McCormick's president and chief executive.

While announcing stronger earnings, McCormick officials also said the company will not bid for any segments of the spice business put up for sale by its Australian rival, Burns Philp & Co.

That conglomerate, which had waged an expensive marketing war against McCormick, said in May that it would sell its spice business. The announcement signaled McCormick's apparent victory in a long and difficult spice war. At the time, McCormick would not rule out making a bid for part of the spice business.

The company also said an error in translation of Venezuelan currency made 1996's results appear slightly stronger than they actually were.

"I can deal with accounting errors better than business errors," said John McMillin, a Prudential Securities analyst. He said McCormick met his expectations. "It appears like management is running the company more pragmatically than before."

On a per share basis for the third quarter, McCormick reported net income of 27 cents, compared with a loss of 30 cents in the year-ago quarter.

Shares of McCormick rose 12.5 cents yesterday, closing at $24.

Lawless said McCormick is moving especially aggressively in grocery stores to boost profits. The company is trying to lower its costs for grocery store shelf space. It is also pushing the stores to lower prices for its fast-moving spices, while investing in an extensive "re-launching" of its dry sauce mixes.

McMillin, one of McCormick's toughest critics in the past, said, "They are fundamentally changing the way they do business. To some extent, they're trying to get people to cook again," he said.

The quarter ending Aug. 31 looked especially strong because of the comparable quarter last year, when McCormick was hit with $71 million in charges.

Those charges included $58 million for ending product lines, selling underperforming businesses and closing a New York packaging plant, plus a $13 million charge for early debt repayment.

The company said that on a comparable basis, without the restructuring, the quarterly increase in earnings per share was 17 percent, up from 23 cents to 27 cents.

With benefits from the restructuring, McCormick is expected to have a much stronger year.

For the first nine months in McCormick's fiscal year, earnings per share were 66 cents, compared with a year-ago loss of five cents. Sales were $1.2 billion, an increase of 4 percent.

Still, as the stock market shatters record after record, McCormick shares have largely remained flat.

Lawless said McCormick must continue to prove itself, to Wall Street and to shareholders. "As we continue to put these successes out in the market place it is our hope that the stock price will rise," Lawless said.

McMillin, the Prudential analyst, said he likes what he sees. "It's only the first or second inning of the game, but I think their strategy makes sense."

Pub Date: 9/18/97

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