Food & Beverage
Sysco Dines on Record Sales in Fiscal First-Quarter 2013, Lines Up Acquisitions for Coming Year
Sysco Corporation reported record quarterly sales in the first quarter of the company's fiscal year 2013, as volume gains drove growth and food cost inflation eased from high levels
Released Tuesday, November 06, 2012
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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite weakening consumer sentiment in the food service and distribution industry, global leader Sysco Corporation (NYSE:SYY) (Houston, Texas) reported record quarterly sales in the first quarter of the company's fiscal year 2013, as volume gains drove growth and food cost inflation eased from the very high levels seen in most of 2012. Net earnings from the quarter were reported to be $286.6 million, a 5.3% decrease from fiscal first-quarter 2012.
Total sales stood at $11.09 billion, a 4.73% increase from the same period last year. Acquisitions accounted for about 0.5% of sales, while restaurant businesses slightly softened. Food cost inflation came in at only 2.2%, by far the lowest rate for any of the past five quarters, and substantially lower than the 7.3% in fiscal first-quarter 2012. Most of the inflation was in the meat and poultry businesses. However, Sysco recorded a $41 million increase in business transformation costs and a $31 million increase in salaries and related expenses, substantially raising operating expenses.
Capital expenditures were reported to be $156 million, compared with $227 million in first-quarter 2011. Sysco had fewer projects at major facilities this year, with most of the money being spent on replacements and expansions to facilities and fleet, as well as technological upgrades.
Industrial Info is tracking $181 million in active projects involving Sysco, including the $12 million relocation of a meat processing plant to College Park, Georgia, from the current facility in northern Atlanta. The project involves constructing a 67,000-square-foot building and installing associated equipment and machinery to increase the production capacity of meat-based protein products. The plant, which is owned by Sysco subsidiary Buckhead Beef Company (Atlanta, Georgia), will include a headquarters and culinary center on the 9-acre site.
"We continue to make progress in deploying our new and enhanced technology platform," said Bill DeLaney, the president and chief executive officer of Sysco, in a conference call. "Just prior to last quarter's call, we converted our East Texas operating company to our new ERP [enterprise resource planning] system--our third location to go live. That conversion went very well, and we moved forward with our plant conversions at our operating companies in North Texas and West Texas last week. The early results in both locations are generally favorable, and we will continue to assess the performance of these two companies closely over the next several weeks.
"These two deployments represent a critical step in our technology implementation timeline for two reasons: one, it is the first instance of multiple operating companies converting simultaneously; and two, the North Texas location is one of our largest operating companies, and services a significant number of our corporate multi-unit customers."
DeLaney added that the company expects to move forward with the next plant conversions in Texas and Louisiana in the coming quarters. "As we prepare for these conversions, we are also evaluating the possibility of potentially accelerating the pace of our deployment in fiscal 2014 and beyond."
Sales improved in all of Sysco's major segments during the quarter:
- The Broadline segment reported total sales of $9.06 billion for the quarter, a 4.61% increase from first-quarter 2012.
- The SYGMA segment, which supplies chain restaurants, reported total sales of $1.42 billion for the quarter, a 2.62% increase from the same period last year.
- Other segments reported total sales of $660.6 million, a 12.24% increase from first-quarter 2012.
- Total Intersegment results were reported to be a loss of $52.1 million for the quarter, compared with a loss of $45.16 million in the same period last year.
"Over the last year, we've been strategically building our presence in the province of Quebec," said Chris Kreidler, the executive vice president and chief financial officer for Sysco, while discussing acquisitions in the conference call. "This is a well-populated area, home to roughly 8 million people, and we believe we have significant opportunities to increase our market share here. As a result, we have completed several acquisitions in Montreal, including a company specializing in Italian imports; a meat processor and distributor; and a seafood company.
"In addition, in late October, we announced our agreement to acquire Distagro, the food service division of a Montreal-based grocery retailer. This is our largest acquisition so far this year, and is designed to complement our growing presence in this highly competitive market."
For more information, visit Industrial Info's North American Food and Beverage Project Database.
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