Hormel Foods Corporation (NYSE:HRL) Q1 2017 Earnings Conference Call Transcript

Feb 23, 2017 • 09:00 am ET

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Hormel Foods Corporation (NYSE:HRL) Q1 2017 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Hormel Foods First Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded Thursday, February 23, 2017.

I would like to turn the conference over to Nathan Annis, Director of Investor Relations. Please go ahead, Mr. Annis.

Executive
Nathan P. Annis

Good morning. Welcome to the Hormel Foods conference call for the first quarter of fiscal 2017. We released our results this morning before the market opened around 6:30 am Eastern. If you did not receive a copy of the release, you can find it on our website at www.hormelfoods.com under the Investors section. On our call today is Jim Snee, President and Chief Executive Officer; and Jim Sheehan, Senior Vice President and Chief Financial Officer. Jim Snee will review each segment's performance for the quarter and also provide an outlook for the remainder of the fiscal 2017. Jim Sheehan will provide detailed financial results for the quarter and further assumptions relating to our fiscal 2017 outlook.

The line will be opened for questions following Jim Sheehan's remarks. As a courtesy to the other analysts, please limit yourself to one question with one follow-up. If you have additional questions, you are welcome to get back in the queue. An audio replay of this call will be available beginning at 11:00 am Central Standard Time today, February 23, 2017. The dial-in number is 888-468-2440 and the access code is 5626388. It will also be posted to our website and archived for one year.

(Forward-Looking Cautionary Statements)

I will now turn the call over to Jim Snee.

Executive
James P. Snee

Thank you, Nathan. Good morning, everyone. Earlier today, we announced record first quarter results of $0.44 per share, up 2% from last year. Sales for the quarter were down 1% on a 2% decrease in volume. Adjusted sales grew 3% while adjusted volume grew 5%. For the quarter, three of our five segments reported earnings growth. Refrigerated Foods, International, and Grocery Products grew earnings, while Specialty Products earnings were flat. Jennie-O Turkey Store had a difficult quarter versus last year with earnings down 25%. Sales were up 13% and volume was up 22% compared to last year. Segment profit margins declined from over 24% in the first quarter last year to 16% this year.

As a reminder, last year, we made dramatic shifts to product mix and cut operating expenses as we managed through avian influenza and a substantial decrease in volume through our system. As we communicated during our fourth quarter call, we knew the first half of the year faced difficult earnings comparisons. However, the erosion in market conditions was deeper and faster than we expected. Three main issues affected Jennie-O Turkey Store's profitability this quarter: declining turkey prices, increased expenses and increased competition. We can handle any one of these issues during a given quarter or year, but all three factors in the same quarter created a difficult operating environment that