Spice giant's profit up 6.6%

McCormick records another record quarter and year

January 24, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Powered by strong sales in its consumer division, McCormick & Co. Inc. yesterday reported record sales and earnings for its fiscal fourth quarter and year.

The world's largest spice producer also announced that it is eliminating 275 jobs - the majority outside the country - as part of a larger plan to streamline operations.

The Sparks company's net income rose 2.5 percent to $59.1 million from $57.6 million for the three months that ended Nov. 30. Earnings per share remained the same at 84 cents per diluted share. Quarterly sales climbed 3.2 percent to $701 million, from $679.5 million.

For the fiscal year, earnings rose 6.6 percent to $146.6 million on sales of $2.4 billion, an 11.7 percent increase over 2000. Earnings per diluted share were $2.09, up from $1.98 in fiscal 2000.

Excluding charges of $7.7 million, or 11 cents a share, related to streamlining operations, McCormick said it would have earned 95 cents per share for the fourth quarter and $2.20 for the year.

On that basis, analysts polled by Zacks Investment Research Inc. expected an average per-share profit of 93 cents for the quarter, and $2.19 for the year.

"We've done this for a while," said Robert J. Lawless, McCormick's chairman, president and chief executive. "This is our fifth year of double-digit EPS growth, and this is our 12th quarter of meeting or beating the expectations of the analysts."

For the year, McCormick's consumer business, which sells products to retailers such as grocery stores, increased 20.3 percent to $1.2 billion.

Sales to industrial businesses, such as food processors who use McCormick's seasonings, gained 4.8 percent. Its packaging business, which sells products such as plastic bottles, grew at 0.92 percent for the year.

McCormick's staff reductions are part of a plan adopted in the fourth quarter to streamline operations over the next 18 months, according to a company statement. There will be "minimal impact to the staff" locally, Lawless said, declining to give a specific number.

McCormick, which employs 2,000 people in Maryland and 8,400 people worldwide, said it will consolidate several distribution and manufacturing locations, reduce administrative and manufacturing jobs, and reorganize several joint ventures at an after-tax cost of $25.6 million.

The company eliminated 135 of the 275 jobs in the past quarter. It is consolidating manufacturing operations in Canada and a distribution center in the United States.

It also eliminated a "very small" number of under-performing product lines around the world and realigned sales operations in the United Kingdom, Lawless said.

Analysts who follow the company said they were satisfied, even impressed, with the spice maker's quarterly and annual performance, particularly in the midst of a national recession.

McCormick surpassed its own earnings expectations and posted a gross profit margin of 40.9 percent for the year - an increase of 3 percentage points over fiscal 2000.

"It was a pretty remarkable year for McCormick," said Mitchell B. Pinheiro, a package food analyst with Janney Montgomery Scott LLC in Philadelphia.

McCormick was able to post double-digit growth last year even as it absorbed the effects of acquiring Ducros, Europe's largest spice producer, in 2000, increased its marketing expenses and embarked on cost-saving initiatives, Pinheiro said.

McCormick "is one of the most consistent package food companies around," said Andrew Lazar, a senior package food analyst for Lehman Brothers in New York.

Lazar said the company's ability to deliver on its sales margin and earnings-per-share targets impressed him. "Predictability and consistency is critical for a food company's valuation," he said.

Shares of McCormick gained 18 cents to close yesterday at $42.93 on the New York Stock Exchange.

For 2002, McCormick expects sales growth of 4 percent to 6 percent; gross profit margin improvement of 0.5 to .75 percentage points; and an increase in earnings per share of 9 percent to 11 percent.

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