Hormel Foods Corporation
12/04/2024 | Press release | Archived content
Hormel Foods Reports Fourth Quarter And Full-Year Fiscal 2024 Results
Hormel Foods Reports Fourth Quarter And Full-Year Fiscal 2024 Results
December 4, 2024Austin, Minn.
Strength in Value-Added Portfolio and $75 million in Operating Income Benefit from Transform and Modernize Initiative Results in Record Operating Cash Flow
Hormel Foods Corporation (NYSE: HRL), a Fortune 500 global branded food company, today reported fourth quarter and full-year fiscal 2024 results. All comparisons are to the fourth quarter of fiscal 2023 unless otherwise noted.
EXECUTIVE SUMMARY - FISCAL 2024
- Net sales of $11.9 billion
- Operating income of $1.1 billion; adjusted operating income1 of $1.1 billion
- Operating margin of 9.0%; adjusted operating margin1 of 9.6%
- Earnings before income taxes of $1.0 billion; adjusted earnings before income taxes1 of $1.1 billion
- Effective tax rate of 22.3%
- Diluted earnings per share of $1.47; adjusted diluted earnings per share1 of $1.58
- Record cash flow from operations of $1.3 billion
EXECUTIVE SUMMARY - FOURTH QUARTER
- Net sales of $3.1 billion
- Operating income of $294 million; adjusted operating income1 of $308 million
- Operating margin of 9.4%; adjusted operating margin1 of 9.8%
- Earnings before income taxes of $280 million; adjusted earnings before income taxes1 of $293 million
- Effective tax rate of 21.5%
- Diluted earnings per share of $0.40; adjusted diluted earnings per share1 of $0.42
- Cash flow from operations of $409 million
EXECUTIVE COMMENTARY - FISCAL 2024
"Fiscal 2024 demonstrated solid execution of our strategy, the power of our portfolio and the resilience of our team," said Jim Snee, chairman of the board, president and chief executive officer.
"Across our business segments, we reinvested in our brands, expanded our market presence and introduced innovative solutions to drive impactful results," Snee said. "In Retail, our flagship and rising brands, such as HORMEL® BLACK LABEL®, JENNIE-O®, SPAM®, and APPLEGATE®, delivered strong growth and expanded households2. Our Foodservice segment again achieved above-industry growth, highlighting the differentiated value and relevant offerings our dedicated team brings to the industry. As expected, our International results reflect a solid recovery, and we remain well positioned to continue expanding our global presence."
"The combination of underlying business strength and the capture of $75 million3 in operating income benefit from our Transform and Modernize (T&M) initiative helped to offset a dynamic consumer environment, the steep decline in whole bird turkey commodity markets, and the production disruption at our Suffolk, Virginia, facility," Snee said.
"We delivered a record year of operating cash flow, enabling us to return a record amount of cash to our shareholders in the form of dividends," Snee said. "The focus on our value-added portfolio, innovation, and T&M initiative has positioned us well for sustainable growth and enhanced shareholder value."
FISCAL 2025 OUTLOOK
"As we enter fiscal 2025, we are in a strong position to deliver quality earnings growth, further expand our market presence, and accelerate the impact of our T&M initiative," Snee said. "We expect each of our three segments to deliver top line growth as we continue to lead on-trend categories, increase brand investments, and drive innovation in the marketplace."
In fiscal 2025, the Company expects:
- Net sales of $11.9 billion to $12.2 billion; organic net sales1 growth of 1% to 3%
- Operating income in the range of $1.13 to $1.23 billion
- Adjusted operating income1 in the range of $1.18 to $1.28 billion
- Diluted earnings per share in the range of $1.51 to $1.65
- Adjusted diluted earnings per share1 in the range of $1.58 to $1.72
| Fiscal 2025 Outlook | |
| Net Sales | $11.9 - $12.2 billion |
| Adj. Operating Income1 | $1.18 to $1.28 billion |
| Adj. Diluted EPS1 | $1.58 - $1.72 |
| Effective Tax Rate | 22.0 - 23.0% |
The Company's fiscal 2025 outlook assumes:
- Net sales and earnings impact from lower whole bird turkey commodity markets that are most acute in the first quarter
- Net sales and earnings impact from the snack nuts supply disruption will continue in the first quarter with sequential improvement from the PLANTERS® brand beginning in the second quarter
- Estimated incremental benefits from the T&M initiative in the range of $100 million to $150 million
DIVIDENDS
"Returning capital to our shareholders is a top priority," said Snee. "We recently announced a 3% increase in our dividend, raising the annual rate to $1.16 per share. This marks the 59th consecutive year of annual dividend growth at Hormel Foods."
Effective Nov. 15, 2024, the Company paid its 385th consecutive quarterly dividend at the annual rate of $1.13 per share.
PROGRESS EXECUTING TRANSFORM AND MODERNIZE
In fiscal 2024, the Company made meaningful progress delivering value through the T&M initiative, generating $75 million3 in operating income benefit. These benefits are embedded within the overall performance of the business, and the Company expects to see continued value in future years.
The Company expects to realize an incremental $100 million to $150 million in benefits from the T&M initiative in fiscal 2025, as the planned expansion of the program accelerates value returned to the organization.
The T&M initiative is focused on transforming the supply chain, minimizing portfolio complexity, investing in data and technology, and enhancing people and processes. The benefits from the T&M initiative are long-term in nature as they provide strategic fuel for growth for the core business.
The T&M initiative is an integral part of achieving the Company's target to deliver at least $250 million in annualized operating income growth in fiscal 20264.
SEGMENT HIGHLIGHTS - FOURTH QUARTER
Retail
- Volume down 6%
- Net sales down 4%
- Segment profit up 29%; adjusted segment profit1 up 4%
Year-over-year growth from many branded items, including APPLEGATE® natural and organic meats, HORMEL® BLACK LABEL® bacon, the SPAM® family of products, JENNIE-O® ground turkey, and HORMEL® SQUARE TABLE™ entrees was more than offset by volume and net sales declines driven by the Value Added Meats, Snacking & Entertaining, and Convenient Meals & Proteins verticals. Excluding the impact of last year's non-cash impairment charge, adjusted segment profit1 increased due to continued benefits from lower logistics expenses and incremental savings from the T&M initiative.
Foodservice
- Volume up 2%
- Net sales up 1%
- Segment profit down 8%
Volume and net sales growth were driven by strong performance across the premium prepared proteins, salty snacks, turkey, bacon, and pizza toppings categories. Products such as Heritage Premium Meats offerings, HORMEL® FIRE BRAISED® meats, branded JENNIE-O® turkey, PLANTERS® snack nuts, and CAFE H® globally inspired proteins delivered top line growth. Segment profit decreased due to lower margins in Heritage Premium Meats, poultry, and pizza toppings, as well as higher selling, general and administrative expenses.
International
- Volume down 10%
- Net sales up 1%
- Segment profit up 184%
Net sales grew due to demand in China and strong branded exports for SPAM® luncheon meat and SKIPPY® peanut butter. Considerable volume declines in turkey exports resulted in lower volumes compared to the prior year. Segment profit for the quarter was significantly above the prior year, due to improved export margins, favorable results in China, and growth from our investments in the Philippines and Indonesia.
SELECTED FINANCIAL DETAILS - FISCAL 2024
Income Statement
- Operating margin and adjusted operating margin1 were 9.0% and 9.6%, respectively, compared to 8.9% and 9.8% for the previous year, respectively.
- Selling, general and administrative expenses as a percent of net sales, and adjusted selling, general and administrative expenses as a percent of net sales1 were 8.4% and 7.8%, respectively, compared to 7.8% and 7.1% last year, respectively.
- Advertising investments were $163 million, compared to $160 million last year. The Company continues to support its leading brands in the marketplace through strategic investments.
- The effective tax rate was 22.3%, compared to 21.8% last year.
Cash Flow Statement
- Record cash flow from operations was $1.3 billion.
- Dividends paid to shareholders were a record $615 million.
- Capital expenditures were $256 million, compared to $270 million last year. During the year, the Company invested in capacity expansions for HORMEL® FIRE BRAISED® products, APPLEGATE® products and the Jiaxing, China, facility. The target for capital expenditures in fiscal 2025 is $275 million to $300 million.
- Depreciation and amortization expense was $258 million. The full-year expense for fiscal 2025 is expected to be approximately $265 million.
Balance Sheet
- The Company remains in a strong financial position with ample liquidity, a conservative level of debt and consistent cash flows.
- Cash on hand increased to $742 million at fiscal year-end, from $737 million at the beginning of the year.
- Inventories at fiscal year-end were $1.6 billion, a decrease of $104 million from the beginning of the year.
- Total long-term debt, including current maturities, was $2.9 billion at fiscal year-end.
PRESENTATION
A conference call will be webcast at 8 a.m. CT on Dec. 4, 2024. Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 800-549-8228 and providing the access code 13364. An audio replay is available at www.hormelfoods.com. The webcast replay will be available at noon CT, Dec. 4, 2024, and will remain on the website for one year.
END NOTES
1 Non-GAAP measure. See Appendix: Non-GAAP Measures to this news release for more information.
2 Circana, Receipt Panel, Total Omnichannel; 52 weeks ended 10/06/24.
3 Representative of the Buy, Make, and Move T&M initiative pillars.
4 Compared to fiscal 2023 adjusted operating income1.