Hormel Foods Corporation (NYSE:HRL) Q1 2016 Earnings Conference Call Transcript

Feb 16, 2016 • 10:30 am ET

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Hormel Foods Corporation (NYSE:HRL) Q1 2016 Earnings Conference Call Transcript

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Presentation
Executive
Unidentified Speaker

Good morning everyone. Once again, I'm Jon Feeney, CAGNY Conference Co-Chair. And once again, I have the pleasure of introducing Jeff Ettinger, Chairman and CEO, Hormel Foods. But first, I'd like to take this opportunity to thank Hormel for hosting lunch today, featuring many of their leading branded retail and food service items that will be immediately after this presentation.

Hormel was nice enough to move up their strong earnings release this morning for this presentation, which you probably saw this morning, just like they've been nice enough to lead the industry in returns for the past 15 years and to grow dividends every year for the past 50. For 125 years, they've been the protein company everyone else would like to be. And through the recent acquisitions like Skippy and Muscle Milk, they're very quickly becoming the food and CPG company everyone would like to be.

Today, their CFO, Jody Feragen will cover the highlights of their earnings in lieu of an earnings call first, while both Jeff and recently named President and COO, Jim Snee will follow up and focus on their long-term strategic efforts, of course followed by your questions.

So, Jody, welcome. Thank you, and take it away.

Executive
Jody Feragen

Thank you, Jon for that introduction.

(Forward-Looking Cautionary Statements)

As Jon said, we did wait to deliver our record quarter for this morning, $0.43 per share, our 11th consecutive quarter of record earnings and we were pleased that four of our five business segments contributed to the growth.

Now, sales were down 4% due to lower pork markets, as well as the turkey harvest supply issues that we'll talk about later. You'll note that the earnings per share and all the earnings per share numbers in the presentation have been adjusted for the two-for-one stock split that our shareholders approved on January 26 and became effective on February 9.

So, taking a look at the segments, Grocery Products segment operating profit was up 26%, really benefitting from improved operational and supply chain efficiencies. In the first quarter of 2015 we rationalized our plant in Stockton, California and moved that production into other facilities. So, they're seeing a nice benefit from that and they're also winning with favorable raw material costs.

Sales were down 4%, as we saw some softness in the canned meats area but we were really pleased with the results of our HORMEL bacon toppings, our CHI-CHI foods products and our Wholly Guacamole items. Refrigerated Foods had an outstanding quarter, segment profit up 65%. And really, it was great improvement -- a great performance across all our value-added businesses, as well as strong pork operating margins.

This segment also benefitted from the inclusion of the Applegate Farm operations. That was a business we acquired in July of 2015 and it continues to perform as we expected. I think you'll hear a little bit more about that later in the presentation today. Sales were up 2% on a 5% volume increase as the higher sales were offset by