McCormick Reports Strong First Quarter Performance

Hunt Valley / MD. (mcc) McCormick + Company Inc., a global leader in flavour, reported financial results for the first quarter ended February 29, 2024 and reaffirmed fiscal 2024 outlook.

President and CEO’s Remarks

President and CEO Brendan M. Foley: «We are pleased to start the year with strong first quarter performance, which reflects the early success of our prioritized investments to drive impactful results. We drove sequential improvement in volumes in our Consumer and Flavor Solutions segments. We remain confident in the sustained trajectory of our business, and in our ability to deliver on our 2024 outlook and our long-term financial objectives.

«Our commitment to deliver on our long-term objectives is underpinned by our proven track record, our broad and advantaged global portfolio, our focus on high growth, profitable categories, our alignment with consumer trends, as well as our differentiated heat platform. We continue to prioritize investments in key categories and executing on the initiatives within our growth levers, including brand marketing, new products and packaging, category management, and proprietary technology. We are well positioned with our cost savings programs to fuel investments as well as generate operating margin expansion.

«As we look ahead, we are pleased with the momentum we are seeing in the business and continue to expect improved volume performance, which will build throughout the year. Our results for the quarter coupled with our growth plans, give us confidence in achieving the mid to high-end of our projected constant currency sales growth for 2024. Our business fundamentals are strong, and we are confident we will continue to deliver long-term profitable growth and drive value for shareholders.

«Lastly, I want to recognize McCormick employees, as they remain the cornerstone of our success. I am grateful for and energized by both their ongoing contributions and the results that they are driving. Importantly, we remain committed to elevating our power of people culture and to building the next generation of leaders and capabilities that will drive our success well into future years.»

First Quarter 2024 Results

McCormick reported 3 percent sales growth in the first quarter from the year-ago period, including a 1 percent favorable impact from currency. Constant currency sales growth reflected a 3 percent increase from pricing actions, partially offset by a 1 percent volume and mix decline attributable to the Company’s strategic decisions to discontinue low margin business and divest a small canning business. Underlying volume and product mix was flat compared to the first quarter of the prior year.

Gross profit margin expanded 140 basis points versus the first quarter of last year. This expansion was driven by favorable product mix, cost savings led by the Company’s Comprehensive Continuous Improvement (CCI) and Global Operating Effectiveness (GOE) programs, and pricing actions that were partially offset by cost inflation. Selling, general, and administrative expenses increased from the year-ago period driven by increases in brand marketing as well as research and development investments, partially offset by CCI-led and GOE cost savings.

Operating income increased to USD 234 million in the first quarter of 2024 compared to USD 199 million in the first quarter of 2023. Excluding special charges, adjusted operating income was USD 238 million in the first quarter of 2024 compared to USD 227 million in the year-ago period. In constant currency, adjusted operating income increased 4 percent from the year-ago period driven by our sales performance and gross margin expansion partially offset by higher selling, general, and administrative expenses.

Earnings per share was USD 0.62 in the first quarter of 2024 compared to USD 0.52 in the year-ago period. Special charges lowered earnings per share by USD 0.01 in the first quarter of 2024 and by USD 0.07 in the prior year period. Excluding these special charges, adjusted earnings per share was USD 0.63 in the first quarter of 2024 compared to USD 0.59 in the year-ago period. This increase was driven by higher adjusted operating income, higher income from unconsolidated operations driven by strong performance by the Company’s largest joint venture, McCormick de Mexico, partially offset by a higher adjusted effective tax rate.

Net cash provided by operating activities through the first quarter of 2024 was USD 138 million compared to USD 103 million through the first quarter of 2023. The increase was primarily driven by higher operating income and working capital improvements.

Fiscal Year 2024 Financial Outlook

McCormick’s 2024 outlook reflects the Company’s commitment to strengthen volume trends and prioritize investments to drive profitable results and return to differentiated volume-led growth as the year progresses. The Company’s CCI and GOE programs are fueling growth investments while also driving operating margin expansion. Currency rates are expected to unfavorably impact sales, adjusted operating income and adjusted earnings per share by approximately 1 percent.

In 2024, McCormick expects sales to range between minus 2 and plus 1 percent compared to 2023, or minus 1 and plus 1 percent on a constant currency basis. The Company expects a favorable impact from the prior year’s pricing actions. Through the power of its brands and its targeted investments, the Company expects to improve volume trends as the year progresses and return to volume growth, absent any new macroeconomic headwinds. The Company’s strategic decisions in 2023 to discontinue low margin business and divest a small canning business will impact volume growth in 2024.

Operating income in 2024 is expected to grow by 8 percent to 10 percent from USD 963 million in 2023. The Company anticipates approximately USD 15 million of special charges in 2024 that relate to previous organizational and streamlining actions. Excluding the impact of special charges in 2024 and 2023, adjusted operating income is expected to increase 3 percent to 5 percent, or in constant currency 4 percent to 6 percent, driven by gross margin expansion partially offset by a significant increase in brand marketing investments.

McCormick projects 2024 earnings per share to be in the range of USD 2.76 to USD 2.81, compared to USD 2.52 of earnings per share in 2023. The Company expects special charges to lower earnings per share by USD 0.04 in 2024. Excluding these impacts in 2024 and 2023, the Company projects 2024 adjusted earnings per share to be in the range of USD 2.80 to USD 2.85, compared to USD 2.70 of adjusted earnings per share in 2023, which represents an expected increase of 4 percent to 6 percent, or in constant currency 5 percent to 7 percent. For fiscal 2024, the Company expects strong cash flow driven by profit and working capital initiatives and anticipates returning a significant portion of cash flow to shareholders through dividends.