090219 Hormel Foods First-Quarter Profit Falls 8% On Hog Costs

February 19, 2009

(AP) -- Hormel Foods Corp., maker of Spam and other food products, said today that its fiscal first-quarter profit fell 8 percent as its refrigerated foods segment was partly weighed down by bigger-than-expected hog costs.

Earnings dropped to $81.4 million, or 60 cents per share, compared with $88.2 million, or 64 cents per share, a year ago.

The Austin, Minn.-based company, also known for its chili and Jennie-O Turkey products, says revenue rose 4 percent to $1.69 billion from $1.62 billion.

Analysts polled by Thomson Reuters, whose estimates generally exclude one-time items, forecast profit of 51 cents per share on sales of $1.73 billion.

The refrigerated foods division saw its operating profit slide 27 percent. Aside from hog costs, the unit was also hurt by weaker-than-expected primal markets. Operating profit for the specialty foods segment dropped 16 percent.

The grocery products division faired better, with operating profit up 9 percent on strong canned meat sales.

Though Jennie-O Turkey Store's operating profit fell 16 percent, Chief Executive Jeffrey M. Ettinger said in a statement that the unit was "doing a good job of addressing the difficult market conditions, including very weak commodity meat markets and higher input costs that continue to work their way through the system."

The recession has led to increased sales of some traditional products and weaker demand for some of Hormel's newer convenience items, Ettinger added.

Budget-conscious consumers have curbed their spending due to economic and unemployment concerns, with some making fewer food purchases or trading down as they try to weather the current volatility.

The company maintained its 2009 profit outlook of $2.15 to $2.25 per share.

Analysts expect full-year earnings of $2.21 per share, with the low end of estimates at $2.18 per share and the high end at $2.25 per share.