McCormick gives boost to expected '06 earnings

Spice maker's 3Q was `best in a long time,' CEO says

September 28, 2006|By Allison Connolly | Allison Connolly,SUN REPORTER

Buoyed by stronger than expected third-quarter sales, McCormick & Co. yesterday raised its earnings projection for the year in anticipation of the holiday season, traditionally its busiest time of year.

The Sparks-based spice maker reported earnings of 42 cents a share, excluding charges related to the company's continuing restructuring, beating analysts' expectations by 6 cents. Including those charges, the company reported earnings of 32 cents a share, or $43.1 million, down from 35 cents a share, or $48 million, for the same period a year ago.

Revenue rose 6 percent to $663.1 million, compared with $622.7 million a year ago.

"This is the best quarter in a long time," Robert J. Lawless, chairman, president and chief executive officer, said yesterday in an interview.

As a result, the company raised earnings guidance for 2006 by 4 cents to between $1.45 and $1.48 per share, from between $1.41 and $1.44 a share. Excluding a restructuring charge of 22 cents and stock-related compensation expense of 11 cents, the annual growth rate should be in the range of 11 percent to 12 percent, Lawless said.

Wall Street responded favorably, sending the stock up $1.24, or 3.35 percent, to $38.29, a 52-week high and near its all-time high.

Sales were boosted by growing demand for the company's ethnic products, including Hispanic foods and the recently acquired Simply Asia and Thai Kitchen brands. New pricing and the elimination of less profitable products and customers also helped sales and offset rising energy and commodities costs, Lawless said.

To drive growth through the historically strong fourth quarter, Lawless said the company will spend more on advertising - about $12 million, or 6 cents a share - than it has in the last five years. About 40 percent of the company's annual profit is earned during the fourth quarter, he said. Holiday ads will begin running Oct. 30, compared with Dec. 5 last year.

Analyst George Askew, of St. Louis-based Stifel, Nicolaus & Co. Inc., wrote in his research report that McCormick's first quarter 2007 will "benefit mightily from the fourth-quarter spending, setting the stage for a powerful start to the next fiscal year."

McCormick's three-year restructuring plan, which aims to shed up to 1,000 jobs across the company by 2008, is on track, Lawless said. He didn't have a final tally of how many Maryland employees had taken advantage of the buyout packages or early retirements yet because they are continuing. The company expects the plan to cost from $110 million to $130 million, and save $50 million a year.

allison.connolly@baltsun.com

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