Hormel Foods' Sales Steady, Profits Up for 2Q09

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Researched by Industrial Info Resources (Sugar Land, Texas)--Hormel Foods Corporation (NYSE:HRL) (Austin, Minnesota) released earnings details for the company's 2009 fiscal year second quarter, which ended April 26, 2009. While sales of $1.6 billion were relatively even with 2Q08, the company's net earnings of $80.4 million represented a 4% increase year over year.

Hormel operates in five business segments. Although operating profits in three of the company's five segments declined, the company's Jennie-O Turkey Store segment lifted profits enough that total profit for all segments was 1.7% higher than 2Q08. Operating profits for each segment are as follows:

• Grocery Products - operating profit of $43.7 million, up 5% from 2Q08
• Refrigerated Foods - operating profit of $51.7 million, down 7% from last year
• Jenny-O Turkey Store - operating profit of $16.7 million, up 42% from 2Q08
• Specialty Foods - operating profit of $15.4 million, down 0.5%
• Other (primarily international sales) - operating profit of $5 million, down 14% from 2Q08

The strong U.S. dollar was the primary cause of the decreased profits in the "Other" segment, while a double-digit decrease in turkey production helped substantially increase operating profits in the currently oversupplied turkey market. As the economy has softened, an increased number of people are eating at home, rather than in restaurants, leading to strong sales of Hormel products such as SPAM and Dinty Moore stews, which have strong value appeal. "We have seen a continuation of some of the same trends we saw in the first quarter, as consumers seek value in retail channels while foodservice sales remain soft," said Hormel's President, Chairman, and CEO Jeffrey Ettinger.

Although profits of the company's Refrigerated Foods segment were down, within this general category, the Meat Products group performed well. "The overall weakness in [the Refrigerated Foods] segment masked a very strong performance by our Meat Products group, which achieved high single-digit sales increases of its branded portfolio of products," said Ettinger. These increased sales are perhaps guiding Hormel's current capital growth strategies.

Hormel is currently constructing a grassroot meat processing and preparation plant in Dubuque, Iowa. Construction of the plant, which has an estimated total investment value of $89 million, kicked off in June of 2008 and is scheduled to be completed in November of this year. The 327,000-square-foot building will process meat and produce microwavable meals. Information on this and other projects of the Food & Beverage Industry can be found in Industrial Info's North American Industrial Database.

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