SPARKS, MD. — McCormick & Co. said its performance in the spices and seasonings category has sequentially improved in recent quarters behind new product development, increased marketing and other strategic actions initiated over the past two years. The Sparks-based company aims to sustain its momentum with a pipeline of products designed to meet consumer demand for convenience, global flavors and fresh and organic fare.
For the fiscal year ended Nov. 30, 2015, McCormick had net income of $401.6 million, equal to $3.14 per share on the common stock, which was down 8% from income of $437.9 million, or $3.37 per share, for the prior year. Adjusted earnings per share, including the unfavorable impact of foreign currency translation, rose 3% to $3.48 from adjusted earnings per share of $3.37 the year before.
Net sales for the year rose by 1.3% to $4,296.3 million from year-ago sales of $4,243.2 million. In constant currency, the company’s sales grew 6% over the fiscal 2014.
During the fiscal year, McCormick delivered a record $98 million of cost savings, up 42% from the prior year, and completed three bolt-on acquisitions. The company also increased investment in brand marketing by 6%.
|Lawrence Kurzius, president and c.o.o. of McCormick|
“Our 2015 results, including the improvements in our U.S. consumer business, demonstrate the alignment of our business with today’s consumer and the effectiveness of our strategies,” said Lawrence Kurzius, president and chief operating officer of McCormick, during a Jan. 28 earnings call with financial analysts. “We are excited about our plans and potential for even greater growth in 2016, with new products, incremental marketing, distribution expansion opportunities and tools for a better retail partnership. Our acquisition pipeline is strong, and we have aggressive cost savings programs under way and a culture of participation and high performance.”
For the fourth quarter, McCormick earned $149.2 million, or $1.17 per share, which was up 0.8% from $148 million, or $1.15 per share, for the same quarter of the previous year. Net sales increased 2.4% to $1,201.9 million from $1,173.6 million. In constant currency, sales were up 8% over the prior-year quarter.
Consumer segment operating income for the quarter was $166 million, down 1.9% from the prior-year period. Results included sales growth and cost savings, offset by higher material costs and employee benefit expense and an increase in brand marketing. Sales for the segment increased 1% to $784.6 million over the year-ago quarter, driven by acquisitions, higher volume and product mix and pricing actions taken to offset higher input costs. In constant currency, sales increased 6%.
“We think we are making great progress with the improvement actions that we started in the early part of 2014 to build brand equity, accelerate innovation and to win at retail,” Mr. Kurzius said. “We really think that we’ve gotten a good handle on this. We have worked with our leading customers, with our new tools on both category management, assortment management, and pricing management. And we think that we’ve made a great deal of progress and really have some positive momentum building in this part of our business. In many of the subcomponents of the category we’re clearly gaining share and with many of the individual customers we’re gaining share as well.
“So we think we turned the corner on the problem and are in a position to build from a base of strength that’s been established by some of the heavy lifting done over the last two years.”
Industrial segment operating income for the quarter advanced 53% to $46.2 million, as a result of sales growth and cost savings, which more than offset higher material costs and employee benefit expense. Segment sales increased 4% to $417.3 million, driven by higher volume and product mix, a gain on the acquisition of Brand Aromatics and pricing actions taken to offset higher input costs. In constant currency, segment sales grew 11%.
“Certainly improving the product mix and moving toward flavors and more value-added technically differentiated product is part of the margin equation and the overall trend in our industry toward more natural, less artificial is an important driver of volume for us because this is an area where we think we’ve got particular expertise,” Mr. Kurzius said.
Looking ahead to 2016, the company expects to deliver sales growth of 4% to 6% in constant currency and projects earnings per share for the fiscal year in the range of $3.62 to $3.69.
“Heading into 2016, we have strong momentum, effective growth initiatives, and a lot of excitement,” Mr. Kurzius said. “We continue to see strong alignment between our business and today’s consumers that are seeking bolder flavors, exploring ethnic cuisine, buying more fresh ingredients, focused on wellness, and looking for convenience.”Effective Feb. 1, Mr. Kurzius will assume the role of president and chief executive officer, succeeding Alan Wilson, chairman and c.e.o., who will transition to the role of executive chairman.