Hormel Foods: Reports Third Quarter 2022 Results

Austin / MN. (hrl) Hormel Foods Corporation, a leading global branded food company, reported results for the second quarter of fiscal 2022. All comparisons are to Q3 of fiscal 2021 unless otherwise noted.

Third Quarter Highlights

• Record net sales of USD 3.0 billion, up 6 percent; organic net sales up 3 percent
• Operating income of USD 291 million, up 40 percent; up 17 percent compared to adjusted operating income of USD 248 million last year
• Operating margin of 9.6 percent, compared to 7.2 percent last year and compared to adjusted operating margin of 8.7 percent last year
• Pretax earnings of USD 290 million, up 42 percent; up 18 percent compared to adjusted pretax earnings of USD 245 million last year
• Effective tax rate of 24.5 percent, compared to 13.3 percent last year
• Diluted earnings per share of USD 0.40, up 25 percent; up 3 percent compared to adjusted diluted earnings per share of USD 0.39 last year
• Cash flow from operations of USD 186 million, up 143 percent

Executive Commentary

«We delivered another quarter of record sales and double-digit operating income growth,» said Jim Snee, chairman of the board, president and chief executive officer. «In the current environment, delivering seven straight quarters of record sales and four consecutive quarters of earnings growth is a notable achievement and speaks to the effectiveness of our strategy and the importance of our brands in uncertain times. Our team’s execution played a pivotal role in our growth this quarter, as together, we overcame significant challenges, including continued broad-based inflationary pressures, persistent upstream and downstream supply chain disruptions, limited turkey supply, and impacts in China from COVID-related restrictions and temporary plant shutdowns.»

«We continued to benefit from our balanced business model during the quarter, led by outstanding contributions from Jennie-O Turkey Store and Refrigerated Foods,» Snee said. «The Jennie-O Turkey Store segment significantly outperformed our profit expectations for the quarter as the team managed limited turkey supply effectively and maximized operational performance. Refrigerated Foods delivered double-digit, value-added earnings growth on retail and foodservice items, more than offsetting lower commodity profitability. Similar to last quarter, impressive performance from these businesses helped mitigate higher input and supply chain costs across all segments. Earnings growth was also supported by the snack nuts business, which continues to meet our expectations.»

«Our brands remain healthy, continue to generate growth and are responding well to pricing actions,» Snee said. «Consumers and operators continued to engage with our brands due to their value, convenience and versatility. The team drove volume, sales and share gains at retail for brands. Likewise, demand for our foodservice products was strong, as operators again turned to our items to help mitigate labor pressures and diversify menu offerings. Value-added products such as our premium bacon and sausage, sliced meats and our line of premium prepared proteins performed exceptionally well this quarter. Our strategy of building a portfolio with both premium and value offerings continued to serve us well as macroeconomic conditions pressure some of our customers, consumers and operators. Our teams remain keenly focused on the long-term needs of the business, our strategic priorities and protecting the equity of our leading brands.»

Outlook

«From a top-line and bottom-line perspective, the business remains healthy as we continue to navigate some of the most difficult operating conditions in the company’s 130-year history,» Snee said. «We are confident in our ability to exceed our previous sales guidance due to strong demand for our foodservice and center store grocery brands, higher turkey markets and the pricing actions we have taken across the portfolio. Our long-term strategy to meet consumers where they want to eat, with a broad portfolio of products, has been crucial to our growth in the current environment.»

«We expect elevated cost inflation to persist, primarily related to operations, logistics and raw material inputs,» Snee said. «As a result, we are revising our full year earnings guidance range. We view the majority of the escalated cost pressures we are currently absorbing as transient and likely to subside over the coming quarters.»