AUSTIN, MINN. — An “unplanned production interruption” at a Hormel Foods’ nut-processing plant in Suffolk, Va., was a drag on second-quarter earnings, and its negative effect has carried over to the third quarter.

James P. Snee, chief executive officer, said on a Sept. 4 earnings call the situation will be “largely resolved” by the end of this fiscal year, which for Hormel is Oct. 30.

 “(CFO Jacinth Smiley) and I both talked about the impact of our Suffolk plant disruption,” Snee said on the call. “That has an impact in the third quarter, will continue to have an impact in Q4 as we continue to ramp back up and we get improved fill rates, the continued headwind of our contract manufacturing.”

For the third quarter, Hormel reported declines in retail segment net sales, volume and profit due in part to the production disruption, which depressed sales of its Planters brand snack nut products. Retail volume was down 9% compared with the year-ago period, net sales fell 7% to $1.76 billion and segment profit declined 15% to $127 million.

The company also revised its fiscal-year outlook and now expects an impact of 6¢ per share related to the disruption, which occurred in May after the company recalled two Planters products manufactured at its Suffolk plant for potential Listeria contamination. The facility was closed for five weeks.

Snee said that before the recall, Planters “was hitting on all cylinders,” and the brand’s distribution and innovations gains, connection with younger and different consumers and contribution to driving the company’s c-store business were “playing out the way we thought.”

Hormel acquired the Planters brand as part of its 2021 purchase of Kraft Heinz’s nut business. The $3.35 billion deal included the Suffolk plant, a second Planters nut-processing plant in Fort Smith, Ark., and a Corn Nuts production facility in Fresno, Calif.

Snee said Hormel had implemented food safety protocols at the Suffolk plant following the acquisition, including enhanced environmental and product testing.

“And that allowed us to find this issue early and to be able to address it,” he said on the third-quarter earnings call. “So while we could talk about the financial impact and what was right, what was wrong, the fact is our system worked. We found what we needed to find, we addressed it, and we're doing the right thing. …

“The ramp-up has taken us a little longer than we thought. But as we’re ramping back up, obviously we expect demand to correct, and we’ll be able to get back on track to really deliver on that original thesis, which was to drive our whole enterprise entertaining and snacking portfolio.”

Smiley told analysts at the Sept. 5 Barclays Global Consumer Staples Conference that Hormel was “clearly too optimistic” about how soon the Suffolk plant would be back up and running, but for the fourth quarter, company officials believe the issue “will be primarily resolved from a production standpoint.” However, she also said getting fill rates and sales back to where they need to be will take into 2025.

In his Barclays presentation, Snee called Planters’ current status a “supply issue, not a demand issue” and further detailed how Hormel is resolving it. He said the Planters brand was doing well before the recall with plant investments, upgraded lines, new packaging (standup bags) in different sizes and innovation with its Nut Duo Duo-licious flavored almond and cashew products.

The company expects marketing spend to increase during the fourth quarter and for the full year, including an ad campaign to support the Nut Duo product. Snee said at Barclays that bringing innovation to the snack nut category “is so absolutely important” for Hormel on both the retail and foodservice levels.

“Planters is such an important brand to this category that we’ve been able to maintain our space on the shelf and be in a very good position as we restore fill rates to get this business back on track rather quickly,” he said. “So again, all the thesis for when we acquired the brand in terms of what we knew we could do to invest from an advertising, innovation perspective, leverage the synergies on the c-store side of the business, in our Foodservice channel. All of those things have come to fruition, and we know that we’re going to get this back on track.”

Meanwhile, the company continues to work on its financial big picture. At Barclays, Smiley called 2024 “an investment year” for Hormel and said the company was “well on our way” to meeting a target of $250 million in operating income by 2026.