|McCormick Delivers Strong First Quarter Financial Results and Reaffirms 2011 Outlook|
SPARKS, Md., Mar 29, 2011 (BUSINESS WIRE) --
McCormick & Company, Incorporated (NYSE:MKC), a global leader in flavor, today reported first quarter financial results for fiscal year 2011 and reaffirms its 2011 outlook.
Alan D. Wilson, Chairman, President and CEO, commented, "We are operating effectively in a tough environment as demonstrated by our first quarter results. In response to a significant increase in raw and packaging material costs, we now have pricing actions in place on a majority of our products. As an additional offset to these cost increases, employees throughout McCormick are engaged in our Comprehensive Continuous Improvement program. CCI is our on-going initiative to improve productivity and reduce cost throughout the organization. While conditions in Europe continue to challenge our consumer business in that region, we are growing sales in our other regions with product innovation, new distribution and brand marketing support. Product innovation and new distribution are also driving sales for our industrial business. Across both businesses, we have a growing presence in emerging markets and had particularly strong results in Mexico and China this quarter. Through our joint ventures we are gaining further access to emerging markets and reported a significant increase in profit from these businesses early in 2011."
McCormick's first quarter sales rose 2% and increased 3% in local currency, largely as a result of pricing actions taken in response to increased raw and packaging material costs. Volume and product mix was comparable to the prior year period. For the consumer business, volume and product mix declined 2% as increases from product introductions, brand marketing support and new distribution in the Americas and Asia/Pacific region were more than offset by weakness in the Europe, Middle East and Africa region (EMEA) and the estimated impact of a shift in sales from the first quarter of 2011 to the fourth quarter of 2010. As indicated in the announcement of fourth quarter 2010 results, this shift in sales was estimated to be $10 million and was largely the result of U.S. customer purchases in advance of a late 2010 price increase. For the industrial business, increased customer demand in the Americas and EMEA regions included new products and drove a 3% increase in volume and product mix.
McCormick achieved a 10% increase in operating income due in part to higher sales and cost savings from CCI. Also, in the first quarter of 2010, the Company recorded $5 million of product recall costs related to an ingredient from a third-party supplier that affected a number of food companies. In addition to the increase in operating income, income from unconsolidated operations rose at a double-digit rate. McCormick's joint venture in Mexico began 2011 with strong sales and profit growth, although higher commodity costs are expected to impact this business as the year progresses. Also adding to income from unconsolidated operations in the first quarter was McCormick's new joint venture in India that was completed late in fiscal year 2010.
Earnings per share rose 12% to $0.57 from $0.51 in the first quarter of 2010. This $0.06 per share increase was primarily driven by higher operating income, as well as the increase in income from unconsolidated operations. Due to the seasonality of its business, the Company's cash flow from operations is much lower in the first half of the fiscal year and in the first quarter of 2011 was a negative $23 million. Inventory rose during this period primarily as a result of the higher cost of materials, increases related to new products and new distribution, and raw material positions taken in order to assure a steady supply of product. The Company is currently implementing a new inventory management process, which is expected to improve inventory levels.
For fiscal year 2011, McCormick reaffirms its goal to achieve earnings per share of $2.80 to $2.85. Sales are projected to grow 5 to 7% in local currency, with an additional 1% of growth from favorable foreign currency exchange rates based on prevailing rates. Underlying the 5 to 7% sales increase is an estimated 3% from pricing actions to help offset higher material costs, and 2 to 4% from favorable volume and product mix. In addition to higher sales, profit growth in 2011 will also be achieved through CCI cost savings which are expected to be at least $40 million.
Consumer business sales were unchanged from the first quarter of 2010. In local currency sales grew 1% due to increased pricing, largely offset by unfavorable volume and product mix. An estimated $10 million of sales shifted from the first quarter of 2011 to the fourth quarter of 2010 largely as a result of certain U.S. customers which purchased product in advance of a price increase. This shift reduced consumer business sales in the first quarter of 2011 an estimated 2%.
For the first quarter, operating income for the consumer business rose 9% to $87 million as a result of CCI cost savings and a favorable mix of business. This result included a $3 million increase in brand marketing support compared to the year-ago period. Consumer business operating income in the first quarter of 2010 included $2 million of the aforementioned product recall costs.
Industrial business sales rose 6% when compared to the first quarter of 2010. In local currency, sales grew 4% from favorable volume and product mix, as well as higher pricing.
Industrial business operating income rose 12% to $24 million in the first quarter due in part to higher sales and CCI cost savings. This result included a $2 million increase in marketing and product development activity for food service items in the Americas. Industrial business operating income in the first quarter of 2010 included $3 million of the product recall costs.
As previously announced, McCormick will hold a conference call with analysts today at 8:00 a.m. ET. The conference call will be webcast live via the McCormick web site. Go to ir.mccormick.com and follow directions to listen to the call and access the accompanying presentation materials. At this same location, a replay of the call will be available following the live call. Past press releases and additional information can be found at this address.
Certain information contained in this release, including statements concerning expected performance such as those relating to net sales, earnings, cost savings and brand marketing support, are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934.
These and other forward-looking statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by external factors such as damage to our reputation or brand name, business interruptions due to natural disasters or similar unexpected events, actions of competitors, customer relationships and financial condition, the ability to achieve expected cost savings and margin improvements, the successful acquisition and integration of new businesses, fluctuations in the cost and availability of raw and packaging materials, changes in regulatory requirements, and global economic conditions generally which would include the availability of financing, interest, inflation rates and investment return on retirement plan assets, as well as foreign currency fluctuations and other risks described in the Company's filings with the Securities and Exchange Commission. Actual results could differ materially from those projected in the forward-looking statements.
The Company undertakes no obligation to update or revise publicly, any forward-looking statements, whether as a result of new information, future events or otherwise.
McCormick & Company, Incorporated is a global leader in flavor, with the manufacturing, marketing and distribution of spices, seasonings, specialty foods and flavorings to the entire food industry - retail outlets, food manufacturers and food service businesses.
SOURCE: McCormick & Company, Incorporated
McCormick & Company, Incorporated