Consumer sales boost McCormick profit 9% Loss from Asian crisis is more than offset


June 17, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

McCormick & Co. Inc. said yesterday that its second-quarter profits increased by 9 percent, as strong U.S. consumer sales offset weakness in the company's packaging business.

Net income in the three months that ended May 31 was $16.1 million, up from $14.8 million in the same a quarter a year ago. Earnings per share rose 10 percent, from 20 cents to 22 cents. Sales at the Sparks-based spice company rose 5 percent, from $414 million to $435 million.

"The results were in line with expectations," said John McMillin, a New York analyst for Prudential Securities Corp. "This company has shown, after a five-year period of disappointment, that it's on more solid ground."

McCormick said its U.S. consumer sales -- and profits -- increased about 10 percent. Industrial sales rose about 9 percent, but profits were flat because of increased costs for commodities such as pepper. McCormick's packaging business sales and profit fell, in part because the Asian currency crisis is sapping consumer demand.

Robert J. Lawless, the company's chairman and chief executive officer, attributed the strength of the consumer products largely to two company initiatives: promotion of its dry sauce mixes and the lowering of prices for some spices.

The improvement comes three months after McCormick reported that sluggish consumer sales had hurt first-quarter profits. "We said last quarter that we thought we would see some strengthening in the marketplace, and that's in fact what we saw," Lawless said.

Christopher J. Kurtzman, vice president and treasurer, said consumer products that carry McCormick's brand names were among its strongest sellers and that its "unbranded" -- or store and economy -- products were its weakest. "Our strategy to drive branded sales appears to be working quite well," he said.

Lawless said two recently announced contracts -- worth $72 million in annual sales -- did not affect second-quarter results. He said those contracts, with Price Costco and Ahold USA, will probably help starting in the fourth quarter.

McCormick said packaging sales fell partly because its customers, who buy packaging for consumer products such as cosmetics, were facing low consumer demand in Asia.

McCormick shares rose $1.2813 to $33.

Pub Date: 6/17/98

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