McCormick savors record profit

4th-quarter earnings increase 7 percent

January 19, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

McCormick & Co. Inc. said yesterday that strong sales in its consumer division propelled the Sparks-based company to record sales and earnings in the fourth quarter and for the year.

The world's largest spice producer's net income climbed nearly 7 percent in the three months that ended Nov. 30, to $57.6 million, or 84 cents a share, which was in line with analysts' expectations.

Sales in the quarter rose to $680 million, up 9.5 percent compared with the same time last year. Excluding the effects of its acquisition last fall of Paris-based Ducros, sales in the quarter were up 2 percent.

For the year, sales rose 6 percent, to $2.1 billion, and net income increased 33 percent, to $138 million, or $2 a share. Earnings per share, independent of special charges and an accounting change, were $1.98, which was 18 percent more than in fiscal 1999.

"The year was just great," said Robert J. Lawless, McCormick's chairman, president and chief executive. "We're where we want to be."

McCormick officials had set three goals for fiscal 2000: a sales increase of 4 percent to 6 percent, growth in earnings per share of 11 percent to 14 percent and an improvement in gross profit margin of 70 to 100 basis points. Gross margin increased 220 basis points to 37.9 percent.

McCormick, criticized by some analysts for not being aggressive enough in acquisitions, bought Ducros, then the world's second-largest spice maker, in September for $379 million.

Art Cecil, who covers McCormick for T. Rowe Price Associates Inc. in Baltimore, said the earnings were "right in line with expectations." The food sector as a whole, he said, is a mature business and he rates all companies in that sector a "hold."

"Given that background, [McCormick] is probably doing as well as most food companies are in this environment," he said.

Shares of McCormick fell $1.19 yesterday, closing at $36.06.

Ann Gurkin, an analyst at Davenport & Co. LLC in Richmond, Va., who has a "buy" on McCormick, said the food group as a whole was spotty yesterday and that McCormick's decline was probably not wholly attributable to its earnings statement.

The company's goals for this year are sales growth of 12 percent to 14 percent, including the Ducros acquisition, growth in earnings per share of 8 percent to 10 percent - including the 10-cent dilution expected from the acquisition - and a gross profit margin of 40 percent.

"We have the right strategies in place, we're investing in new brands, in research and development and taking more costs out of the business," Lawless said. "That should result in another great year in 2001."

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