Hormel Foods Reports 31% Increase in Operating Earnings

Feb 18, 1999, 00:00 ET from Hormel Foods

    AUSTIN, Minn., Feb. 18 /PRNewswire/ -- Hormel Foods Corporation
 (NYSE:   HRL) today announced operating earnings of  $38,572,000, or $.52 per
 diluted share, for the first quarter ended January 30. This is an improvement
 of $9,125,000, or 31.0 percent, over first quarter operating earnings one year
 ago of $29,447,000, or $.39 per diluted share.
     Total reported earnings for the first quarter of fiscal 1999 of
 $42,380,000, or $.57 a diluted share, are slightly higher than announced
 operating earnings. This increase reflects a one-time gain of $3,808,000, or
 $.05 a diluted share, for the sale of land by Campofrio Alimentacion, S.A.,
 Madrid, Spain, a leading global foods company in which Hormel Foods has a
 21.4 percent ownership interest. Fiscal 1998's total first quarter earnings
 were $46,849,000, or $.61 a diluted share, and included a one-time gain of
 $17,402,000, or $.23 a diluted share, for the sale of the company's Davenport
 (Iowa) gelatin/specialized proteins plant.
     The Austin, Minn.-based multinational meat and food processing firm
 announced strong increases in tonnage volume, totaling 8.7 percent, which
 supported growing category share for many of the company's well-established as
 well as newly introduced consumer-branded, value-added meat and food products.
 Dollar sales of $799,005,000, a decrease of 2.0 percent from the $814,914,000
 reported in the first quarter of fiscal 1998, were lower due to reduced pork
 pricing levels in the marketplace.
     Joel W. Johnson, chairman of the board, president and chief executive
 officer, explained that a combination of factors contributed to the company's
 overall financial performance. "Consumer demand for Hormel Foods products is
 very high. Across our major domestic operating units and internationally, our
 tonnage gains reflect strong consumer response to our product lines and
 marketing initiatives. We also benefited from pork producers bringing to
 market the largest supply of live hogs in history. This allowed company
 facilities to be operated at optimum capacity, resulting in lowering costs and
 increased efficiencies. The abundant supplies also supported tonnage growth
 and led to expanded pork processing margins."
     Johnson added that while Hormel Foods benefited from lower prices for hogs
 in the spot cash market, the company continued to sustain losses from floor
 price hog procurement contracts that paid substantially more than quoted
 market prices. "We paid considerably more in procurement costs during the
 first quarter  than if all our hogs had been purchased on a historical cash
 basis," explained Johnson, "but these contract arrangements enable us to
 protect the quality and availability of our raw material needs.  We expect to
 recover losses from the procurement contracts when pork prices rise above the
 cost of production."
     Marketing successes among core business groups helped drive the first
 quarter growth. Tonnage volume of the Grocery Products Division rose
 significantly with both dollar sales and profits setting new records. Hormel
 bacon bits became the number one product in unit sales in its category with a
 31 percent share. Herb-Ox bouillon, benefiting from a new quick-dissolving
 cube, achieved a 40 percent volume increase and greatly improved distribution.
 A new Mary Kitchen corned beef hash with 50 percent reduced fat is meeting
 good retail acceptance as are three recently introduced Kid's Kitchen Pizza
 Wedges microwave meals in pepperoni, three cheese and cheeseburger varieties.
     For the Meat Products Group, increased sales tonnage was aided by
 double-digit growth in the premium ham, bacon, presliced meats, boneless and
 canned ham and deli dry sausage categories. The Always Tender flavored pork,
 Always Tender fresh pork and Always Tender Consumer Ready fresh pork outpaced
 all product categories and were a major factor in the Meat Products Group's
 improved tonnage, dollar sales and profit performance.
     The Foodservice Group continued its strong growth record with double-digit
 increases in branded tonnage, total tonnage and profits. Fresh pork, led by
 pork ribs and portion-cut and boneless pork, ended the quarter with excellent
 gains as did the presliced meats, pizza toppings, turkey, cooked beef and
 vending categories.
     Jennie-O Foods, now recognized as the world's largest turkey processor,
 recorded value-added, branded tonnage equivalent to last year's first quarter
 and continued to develop improved margins despite excessive industry capacity
 and resulting low prices. Recently introduced were a line of three-pound
 boneless thigh steaks and two flavors of marinated turkey tenderloins.
     For Hormel Foods International (HFI), export volume to Asia-Pacific,
 Europe and Latin America increased dramatically across most major consumer
 brands. SPAM luncheon meat, Stagg chili, Hormel chili, Mary Kitchen hash,
 fresh and frozen pork and branded dry sausage items enjoyed growth in
 virtually every region in which HFI competes.  Key foreign affiliates, KR
 Hormel Foods in Australia, Tulip International A/S in the United Kingdom,
 Hormel Cinta Azul Foods in Central America and Hormel Alimentos S.A. de C.V.
 in Mexico also reported good volume and distribution growth. In the first
 quarter, HFI formed a joint venture with Pure Foods Corporation, a major
 consumer foods company based in Manila, Philippines. The new joint venture,
 known as The Purefoods-Hormel Company, will produce and market a variety of
 canned foods and refrigerated meats under both the Purefoods and Hormel
 brands with distribution to be expanded to other Asian countries having large
 Filipino populations.
     Effective February 15, the company paid its 282nd consecutive quarterly
 dividend which also represented the 33rd consecutive annual increase in the
 dividend rate. The newly established rate of $.66 per share amounted to a
 3.1 percent increase from the former dividend rate of $.64 per share.

SOURCE Hormel Foods