AUSTIN, MINN. — Feed ingredient, beef and pork costs as well as the decline of global financial markets pressured Hormel Foods Corp. earnings during fiscal 2008. For the year ended Oct. 26, net earnings were $285,500,000, equal to $2.11 per share on the common stock, compared with earnings of $301,892,000, or $2.20 per share, for fiscal 2007.
Sales during fiscal 2008 were $6,754,903,000, up from $6,193,032,000 during the previous year.
"As we previously announced, the recent substantial decline in global financial markets negatively impacted our rabbi trust investment performance," said Jeffrey M. Ettinger, chairman, president and chief executive officer. "This, along with greater-than-expected cost pressures and unfavorable product mix changes in our Grocery Products segment, required us to lower our guidance to $2.03 to $2.09 from our earlier guidance range of $2.22 to $2.28 per share. A better-than-expected finish by our Refrigerated Foods segment allowed us to come in at $2.08 per share, near the high end of our revised guidance range."
For the full year, Hormel Foods experienced both volume and sales increases in its business units, and four of the company’s five units had earnings above a year ago. Total operating profits for all of its business segments were up 6% from a year ago.
Operating profit for Hormel’s Jennie-O Turkey Store unit fell 27% during the year due to high input costs. Operating profits for the company’s Refrigerated Foods, All Other, Specialty Foods and Grocery Products units were up 22%, 17%, 14% and 5%, respectively.
For the fourth quarter, net earnings were $67,811,000, or 50c per share, compared with $101,192,000, or 74c per share. Sales for the quarter were $1,861,512,000, which compared with $1,664,347,000 the previous year.
"Despite strong sales of the Spam family of products and other canned items, our Grocery Products segment had an off quarter," Mr. Ettinger said. "The lower results were driven primarily by higher beef and pork trim costs, but also as a result of a slowdown of our Hormel Compleats microwave meal business.
"Our Jennie-O Turkey Store segment continued to experience higher feed and fuel input costs during the quarter that they were unable to offset with increased pricing. An industry-wide oversupply of breast meat kept prices below our cost of production. We do not expect this situation will significantly improve until next spring."
Looking ahead to fiscal 2009, Mr. Ettinger said Hormel Foods faces a series of challenges, including an oversupply of turkey breast meat and higher costs within the Jennie-O Turkey Store business unit, the prospect of higher hog prices as supply declines, and an uncertain economic environment.
"Opportunities include the flexibility that our strong balance sheet provides, the success of our value-added products and the stability of our balanced model," he said. "We anticipate a slow start to fiscal year 2009, with difficult comparisons from the first half of fiscal year 2008, and the opportunity to finish strong in the second half of the year. After assessing these factors and our business plans and prospects for the upcoming year, we are setting our fiscal 2009 guidance range at $2.15 to $2.25 per share."
Mr. Ettinger concluded his remarks by saying that in light of the tight capital markets and reduction in consumer spending, Hormel would manage its capital conservatively and delay capital projects that are not deemed critical. In addition, he said the company now also intends to use the additional capacity added at Hormel’s Dubuque, Iowa, plant for the additional production of canned products. The additional capacity was initially intended for the production of shelf-stable, microwavable meals.