McCormick profit climbs 9 percent

Acquisition helps spice company's 1st-quarter earnings

March 20, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Thanks in large part to its recent acquisition of the world's second-largest spice maker, McCormick & Co. Inc. said yesterday that its first-quarter profit rose 9 percent on a 15 percent jump in sales.

For the three months that ended Feb. 28, the Sparks-based company earned $26.6 million, compared with $24.4 million in the year-earlier period. Sales were $533.5 million, up from $462 million.

On a per-share basis, earnings were 38 cents vs. 35 cents a year earlier. Analysts, on average, had expected earnings per share of 36 cents.

"If there was a soft spot, it was the domestic business," said John McMillin, an analyst at Prudential Securities in New York. "But it was another solid quarter."

Consumer sales were up 33 percent to $269.5 million. But excluding the $379 million acquisition of Paris-based Ducros in August, consumer sales as measured in local currencies were down 1 percent in the Americas, up 3 percent in Europe and up 4 percent in Asia.

Company officials said sales in the Americas were hurt by supermarkets not ordering as many products to refill shelves after the holidays as they had in previous years. "But we're heartened by the fact our share data did not decrease," said Chairman, Chief Executive and President Robert J. Lawless. "We are growing faster than the category, so there is no systematic problem."

According to independent data, retail sales of McCormick's spices and herbs in the Americas during the 12-week period that ended Jan. 28 grew 2.4 percent over the corresponding period last year, while that general spice category in supermarkets and discount stores grew only 1.1 percent. Sales of dry seasoning mixes were up 8.4 percent, while the category as a whole was up 4.9 percent.

"We continued to exceed expectations on [Wall Street]," Lawless said, "and I'm very elated with the quarter."

Industrial sales of flavorings for things such as fast food and soft drinks were up 1 percent in the Americas, up 8 percent in Europe and up 11 percent in Asia in the currencies of the countries where the products were sold. The strongest increase was in sales of snack seasonings and sales to food-service customers.

The packaging business, thanks largely to sales of tubes, was up 7 percent for the quarter.

McMillin said other companies in the sector, such as ConAgra Foods Inc. and H. J. Heinz Co., were suffering from higher costs and lower orders from supermarkets.

Both companies recently announced that their earnings for the quarter would fall short of earlier predictions.

"Other food companies are not achieving their targets," McMillin said, "but McCormick is."

Gross profit margin for the quarter was 39.1 percent, 3.7 percentage points over last year's first quarter.

The company's goals for 2001 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.

Shares of McCormick closed up 60 cents yesterday at $40.60 - $10 higher than its price a year ago.

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