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McCormick sells Broth business as third quarter earnings ease

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Hunt Valley, MD. — Earnings declined despite aggressive pricing and the sale of the Kitchen Basics line of ready-to-use stocks and broths as McCormick & Co. worked to gain a foothold in the third quarter . Last quarter, the food and flavor company’s earnings took a hit amid his COVID-19-related lockdown in China.

McCormick executives discussed third-quarter results on a conference call with industry analysts on Oct. 6. McCormick Chief Executive Lawrence Kurzius said the company’s pricing has responded to inflation and is now focused on expanding capacity for its flavor solutions segment in the US and UK. said.

“Inflation is real and our prices have caught up,” said Mr. Kurzius. “We are now seeing it reach its limits.

“And from a cost standpoint, as we have responded to fluctuations in demand over the past few years, we have seen additional costs above and beyond inflation to serve our customers, creating inefficiencies in our supply chain. I got

“These are costs that we have absorbed. I am.”

Net income for the quarter ended August 31 was $222.9 million, up 5% from $212.4 million in the third quarter of 2021. Adjusted net income was $187.6 million, down 14% from $216.9 million a year ago.

Earnings per share for the third quarter were 82 cents, up 4 percent from 79 cents a year ago. Adjusted earnings per share for the third quarter were 69 cents, down 14 percent from 80 cents a year ago. McCormick said the decline in adjusted earnings was due to lower adjusted operating income. The gain on the sale of the Kitchen Basics business and the net positive impact of special charges increased his earnings per share by 13 cents in the first quarter.

Company-wide net sales for the third quarter reached $1.6 billion, up 3% from $1.55 billion in the year-ago quarter. Adjusting for inflation, sales increased by 6%. This includes his 1% negative impact from the sale of the Kitchen Basics business.

Kurzius said McCormick is “moving aggressively” to eliminate inefficiencies and normalize inventory levels.

“Our actions include investments to increase both manufacturing capacity and reliability in bottleneck areas, enabling better customer service and repatriation of production from overuse of co-packers. he said. “We are returning to a more normal ship schedule and spending less on expensive surge capacity. We are already seeing benefits from reduced overtime and fewer temporary workers.”

In the Consumer segment, third-quarter net sales of $927.9 million were relatively flat compared with $921.9 million in the prior year quarter. Segment results include a 1% unfavorable impact from the sale of Kitchen Basics. Growth was driven by the Americas and Asia/Pacific regions, with pricing moves boosting sales in all three regions, the company said.

Net sales of the Flavor Solutions segment were $667.7 million, up 6% from $627.5 million in the prior-year period. The company said sales were driven by pricing action.

Kurzius said some of the challenges in the flavor solutions segment are related to capacity constraints.

“We could have sold more,” he said. “There could have been more volume…more capacity would have helped, but demand is very strong.”

McCormick is investing in additional Flavor Solutions seasoning capacity, which is expected to come online in early 2023, Kurzius said.

“We are expanding our footprint to support flavor growth,” he said. “We recently opened our new UK Peterborough Flavor Solutions manufacturing facility, supporting strong growth momentum in our quick service restaurants, and earlier this week the first pallets shipped from our new distribution center in Maryland. rice field.”

Updated its fiscal year guidance, the company expects adjusted earnings per share in the range of $2.63 to $2.68 in 2022, compared to adjusted earnings per share of $3.05 in 2021. said there is. Kitchen basic business.