Meat + Poultry - September 2008 - 17

Hormel Foods Q3 earnings
pressured by input costs

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Higher feed input and fuel costs in its Jennie-O Turkey Store division
and relatively flat results in its Refrigerated Foods segment negatively
impacted Austin, Minn.-based Hormel Foods Corp.'s third-quarter earnings. Net income in the third quarter ended July 27 was $51,947,000,
equal to 38c per share on the common stock.
The result was a decline of 9 percent compared with the same period
during fiscal 2007 when the company recorded net income of $57,374,000, or 42c per share. Sales for the
quarter were $1,678,142,000, up from $1,520,005,000 during the same
period of fiscal 2007.
Within Refrigerated Foods, the company's largest business unit, operating income declined 1 percent to $36,331,000 in the third quarter
compared with $36,764,000 during the same period of fiscal 2007. The
company said higher input and other costs were not
fully recovered through pricing and subsequently
contributed to the decline in operating income.
Sales for the quarter were $890,978,000 compared
with $825,285,000 during fiscal 2007. Hormel's Dilusso Deli and Pepperoni lines of products experienced strong sales growth during the quarter while
net sales were down in foodservice.
Operating income in Hormel's Jennie-O Turkey
Ettinger
Store segment declined 61 percent to $8,076,000 in
the third quarter from $20,841,000 during 2007, due to higher feed costs.
Sales for the quarter were $310,532,000. An oversupply of turkey breast
meat in the market also kept pricing of commodity breast meat at a low
level, exacerbating the cost-price differential.
"We were encouraged by the strong top-line and bottom-line growth
by our Grocery Products, Specialty Foods and All Other segments," said
Jeffrey Ettinger, chairman, president and
CEO of Hormel Foods. "Our Grocery Products and All Other segments maintained the
strong momentum they had during the first
half of the year, and our Specialty Foods segment rebounded nicely."
For the first nine months of fiscal 2008, net income was $217,689,000,
or $1.61 per share, compared with $200,700,000, or $1.46 per share,
during the first nine months of fiscal 2007. Sales for the period were
$4,893,391,000 during 2008 compared with
$4,528,685,000 for fiscal 2007.
"We expect to see continued earnings pressure at Jennie-O Turkey Store from higher input costs, as the birds fed with higher grain
prices make their way through the system,"
Ettinger said. "We are adjusting our full year guidance to $2.22 to $2.28
per share, which is above our prior year results of $2.17 per share. We
continue to focus on our long-term objectives to grow the business
through product innovation, increasing brand strength and adding value to our products."
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Meat + Poultry - September 2008

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