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McCormick beats expectations with sales rise

  • McCormick beats expectations with sales rise

    by Market Insider

    Monday, 03 Oct. 2016

    McCormick & Company, Incorporated the US spice giant reported financial results for the third quarter ended August 31, 2016 and provided its latest financial outlook for fiscal year 2016.
    • Sales rose 3% in the third quarter from the year-ago period. In constant currency, the company grew sales 6%, with strong results in both the consumer and industrial segments.
    • McCormick increased gross profit margin to 41.6% from 39.8% in the third quarter of 2015. Operating income was $168 million in the third quarter compared to $139 million in the year-ago period. Adjusted operating income was $172 million, a 12% increase from $154 million in the third quarter of 2015.
    • Earnings per share increased to $1.00 from $0.76 in the third quarter of 2015, mainly due to the increase in operating income and a favorable tax rate. Adjusted earnings per share rose 21% to $1.03 from $0.85 in the third quarter of 2015.
    • For fiscal year 2016, based on its year-to-date performance and growth momentum, McCormick continues to expect solid sales growth and raised its projection for earnings per share.
    McCormick reported a 3% sales increase in the third quarter from the year-ago period, which included an unfavorable impact of 3% from foreign currency exchange rates. Acquisitions added 2% to the sales increase, including the incremental impact of Stubbs, purchased in August 2015, and Gourmet Garden, purchased in April 2016. The remaining sales growth of 4% was driven by product innovation, brand marketing support and expanded distribution, as well as pricing actions to offset an increase in material costs. 
    Analysts pointed out that while sales in the US were up 8%, sales in Europe, the Middle East and Africa were down 2%, with the UK being particularly challenging. Consumer sales in Asia/Pacific rose 5% with growth in sales in China.
    Lawrence E. Kurzius, President and CEO, stated, "Our strong third quarter financial results demonstrate the effective execution of our strategy. We are driving both sales growth and significant productivity improvements, and expect 2016 to be a record year for McCormick. The efforts and engagement of employees throughout the company are driving this performance.
    "Consumer demand for healthy and high quality flavors continues to grow in markets around the world. In both our consumer and industrial segments, we are meeting this demand with a broad portfolio of on-trend products in our base business, innovative new products and through acquisitions. All of these factors contributed to our third quarter sales increase of 3%, which was 6% in constant currency, and we achieved particularly strong growth in our consumer business in the U.S. and in China. We are balancing these strategies to grow sales with our actions to improve productivity and lower costs. Led by our Comprehensive Continuous Improvement (CCI) program, we expect to achieve cost savings of $100 million to $110 million in 2016. We are investing a portion of these savings in brand marketing and other growth initiatives and also driving greater profitability for our business, as demonstrated by the strong increase in third quarter operating income."

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