Restructuring charges dampen growth at McCormick

by Staff
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SPARKS, MD. — Fourth-quarter and year-end income at McCormick & Co. dipped as improved sales and greater efficiency failed to offset restructuring charges.

Net income for the year ended Nov. 30 fell 6% to $202,171,000, compared with $214,941,000 in 2005. During the year, income was negatively affected by restructuring charges of $72,378,000.

Net revenues for the year rose 5%, totaling $2,716,416,000. Convenience items, new flavor varieties for grilling, lower salt alternatives and products with ethnics flavors all led to higher sales volumes.

For the fiscal year, sales for McCormick’s consumer business rose 5% to $1,556,408,000. Industrial business sales rose 4% to 1,160,008,000.

For the fourth quarter, net income again fell 6%, to $83,071,000 from $88,142,000 in the same period of 2005. During the quarter, restructuring charges totaled $13,159,000.

Net revenue for the quarter rose 9% to $803,714,000. New products, effective marketing and the addition of Simply Asia Foods, as well as pricing actions, all boosted sales, the company said.

Sales for McCormick’s consumer business rose 10% in the fourth quarter, totaling $504,531,000. Sales for the company’s industrial business rose 8% to $299,183,000.

"Our financial performance in 2006 exceeded our expectations," said Robert J. Lawless, chairman and chief executive officer of McCormick & Co. "We had four quarters of excellent financial results with strong contributions from both the consumer and industrial businesses. This was achieved during a time of significant change at the company. A restructuring plan that is under way included the consolidation of several large facilities."

Looking ahead, the company expects the steps it took in fiscal year 2006 to positively impact results in 2007.

"The restructuring program announced at the end of 2005 will generate significant savings in 2007," Mr. Lawless said. "We met our cost reduction target of $10 million in 2006 and project cost savings of $30 million in 2007."

The company projects earnings per share growth in the 8% to 10% range, excluding restructuring charges. Sales are expected to grow 4% to 6% with a full year impact of the Simply Asia acquisition, the continued roll out of the spice and seasoning revitalization program and further success with new product introductions.

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