Austin, MN - Hormel Foods Corporation reported the best financial performance in its 107-year history with record earnings for the year ended October 31.
The Austin, Minn.-based marketer of consumer-branded meat and food products earned $139,291,000, or $1.85 per share of common stock on a diluted basis. This is an increase of 27.2 percent from earnings of $109,492,000, or $1.43 per share of common stock, from the previous year. The year-end results included a gain of $17,402,000, or $.23 per share, for the sale of the company's Davenport (Iowa) gelatin and specialized proteins plant to Goodman Fielder Limited, Sydney, Australia. Excluding this one-time gain, the company generated record net earnings for the year of $121,889,000, or $1.62 per share, an increase of 11.3 percent over fiscal 1997. Fiscal 1998 was a 53-week year as contrasted to a 52- week year in 1997.
Dollar sales for the year of $3,261,045,000 were virtually unchanged from the previous record of $3,256,551,000 recorded in 1997.
For the 14-week fourth quarter, the company earned $45,152,000, or $.61 per share, a 1.1 percent increase from the $44,669,000, or $.59 per share, reported for the 13-week concluding quarter of fiscal 1997. Dollar sales for the final quarter were $912,037,000, a 5.1 percent increase over fourth quarter sales one year ago of $868,108,000.
Joel W. Johnson, chairman of the board, president and chief executive officer, described the record performance as a team effort and had high praise for the company's core marketing groups. “Volume growth was very favorable with solid gains registered across all major divisions and, in many cases, faster than many of the categories in which we compete. Major marketing and growth strategies, fueled by record promotional expenditures, led to increased market share and distribution successes for some of the company's best-known product lines. Foodservice, meat products and grocery products each enjoyed a record profit year and was a major contributor to the company's overall results.”
Johnson did note a significant portion of the positive gains enjoyed by company operating units were mitigated by long-term supply agreements designed to buy hogs through purchasing contracts rather than in the spot cash market. “During much of 1998, live market prices were below the floor levels guaranteed by our contracts. The difference in these pricing levels is fully reflected in our reported financial results for the year and creates compensating balances with our hog producers. Should live hog prices rebound during the term of these contracts, Hormel Foods will benefit to the extent the compensating balances offset the higher live market prices.”
In a review of the year's highlights, Johnson singled out the Foodservice Group for recording another year of double-digit tonnage growth. Volume rose more than 20 percent in the fourth quarter and finished 17 percent ahead for the year which is far greater than the industry average. Tonnage of Bread Ready presliced meats, ham, poultry, beef and sausage, was especially strong. The entire ham category, including Cure 81 ham, Old Tyme ham, Curemaster ham and Hormel cooked hams, recorded new volume and distribution gains. Fresh pork was also a major contributor with tonnage up nearly 50 percent for the quarter and year.
For the Meat Products Group, fiscal 1998 was its best year ever with profits at an all-time high and volume growth strong across virtually every product category. High single or double-digit volume increases were developed for Hormel microwave bacon, Hormel fully cooked bacon and Hormel Canadian bacon breakfast meats. In the pepperoni category, Hormel pepperoni and reduced fat Hormel turkey pepperoni improved share of market, volume and distribution. The retail ham category, led by boneless and spiral-sliced varieties of Cure 81 ham, achieved record volume levels. Always Tender fresh pork and Always Tender flavored pork also reached new highs in volume and distribution and continued to advance their status within the company's product portfolio.
The Grocery Products Division surpassed all previous records for profits, tonnage and dollar sales. Volume increases were recorded across all key product categories, including SPAM luncheon meat, Hormel chili, Stagg chili, Dinty Moore stew, Hormel chunk meats, the family of microwaveable foods and Hormel bacon bits, which became the number one market share leader in units sold in fiscal 1998.
The past year was a disappointing one for Jennie-O Foods. Although record volume and sales increases were attained for the fourth quarter and the year as a whole, highly competitive selling prices reduced margins. Profitability was below expectations but improvement in the fourth quarter and progress in developing category share and distribution growth for major further-processed, value-added turkey products provide optimism for improved results in 1999.
For Hormel Foods International (HFI), export sales and profits were the best in history with total tonnage and sales dollars setting new records. The company continues to be encouraged by the growing number of new retail and foodservice customers and the volume gains attained among larger accounts serviced by joint venture operations in Beijing and Shanghai, China. In the United Kingdom, a record category share was achieved for SPAM luncheon meat while launch of the Stagg chili line in both Canada and Australia has met with excellent success.
On November 23, action taken by the Hormel Foods Board of Directors resulted in the company's 33rd consecutive annual increase in the dividend rate. The annual dividend on the common stock of the corporation was raised to $.66 per share from $.64 per share, amounting to a 3.1 percent increase. A quarterly dividend was declared on the common stock at the newly established rate of $.165 per share. The dividend is to be paid February 15, 1999, to stockholders of record January 23, 1999.
In other action, the company announced the distribution of $8,560,000 to employees as part of its discretionary profit sharing program. Under the profit sharing distribution, paid at the discretion of the company's Board of Directors, each eligible employee received, on average, a sum equivalent to 2.41 extra base weekly paychecks. The payments were made companywide to eligible employees on Thanksgiving Day Eve, a tradition that has continued uninterrupted since 1938.
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
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