Spice maker's earnings surge 27%

Cost-cutting helps McCormick set 1st-quarter record

March 20, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

A focus on value-added products, cheaper raw materials and cost-cutting measures helped boost McCormick & Co. Inc. to a record first quarter, the Sparks-based spice producer said yesterday.

Profit for the three months that ended Feb. 28 was $33.8 million, or 48 cents a share, up 27 percent from $26.6 million, or 38 cents a share, in the year-ago period. Sales totaled $519 million, an increase of 4 percent from $499 million in last year's first quarter.

"I'm excited about where we're going and our strategies, our products, our people and the business we're in," said Robert J. Lawless, McCormick's chairman, president and chief executive officer.

The biggest gains were in McCormick's consumer business, the result of new products and price increases. Net sales in the division were up 4 percent, to $237 million, and operating income grew 29 percent, to $35 million.

The industrial division's sales rose 8 percent, to $244 million, largely because of higher volumes and, in the United States, because of strong sales to restaurants and club stores. Operating income for the division was up 21 percent, to $23 million.

One area did not fare well: packaging. Largely because of a decline in sales of tubes to cosmetic companies, that division's sales were down 18 percent, to $37 million, and its operating income dropped 45 percent, to $2.9 million.

"They did very well in the quarter. Clearly, the consumer and industrial businesses were quite strong and more than offset problems in the packaging business," said Eric R. Katzman, an analyst at Deutsche Bank in New York.

"It's pretty smooth sailing at the moment."

McCormick's gross profit margin for the period was 35.7 percent, 1.7 percentage points higher than in the corresponding quarter last year.

The results put McCormick on track to meet the goals it set for this year : sales growth of 4 percent to 6 percent; gross profit margin gains of 0.5 to 0.75 percentage points; and an increase in earnings per share of 9 percent to 11 percent.

Yesterday, McCormick set out objectives it expects to reach by 2006: sales growth of 3 percent to 7 percent; increases in operating profit of 8 percent to 10 percent; and earnings per share increases of 10 percent to 12 percent.

McCormick announced last month a 2-for-1 stock split that will go into effect April 8 for shareholders of record as of next Monday. With the company's share price up nearly 70 percent over the past two years and an all-time high profit last year, Lawless said at the time of the announcement that the move was aimed at signaling the company's confidence in the future.

The company also announced in January that it was cutting 275 jobs, mainly overseas, to trim costs and streamline operations. Those cuts and the combining of some manufacturing facilities, are expected to save the company $8 million annually.

Shares of McCormick were down 20 cents yesterday, closing at $48.85.

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