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Email Content: Poultry Industry News, Comments and more by Simon M. Shane

Hormel Posts Results for the Third Quarter of Fiscal 2022: Jennie-O Profitable


In a release dated September 1st Hormel Foods (HRL) reported on the third quarter of fiscal 2022 ending July 31st 2022.  For the quarter the company earned $218.8 million on revenue of $3,034 million with a diluted EPS of $0.40.  Comparable values for third quarter of fiscal 2021 ending July 25th were net income of $176.9 million on revenue of $2,804 million with a diluted EPS of $0.32. Gross margin increased to 16.6 percent for the most recent quarter compared to 14.8 percent for the third quarter of 2021. Profit margin rose from 6.2 percent in the third quarter of  2021 to 7.2 percent for the most recent quarter.


For the third quarter of 2022 the Jennie-O Turkey Store Segment generated sales of $323.8 million with an operating profit of $37.4 million reflecting an operating margin of 11.5 percent.  For the third quarter of 2021, revenue and operating profit were $350.9 million and $5.8 million respectively yielding an operating margin of 1.6 percent.  Compared to the third quarter of 2021 volume for the Jennie-O segment was down 19.9 percent to 149.93 million lbs. as a result of losses due to HPAI Sales value was down 7.7 percent. Unit revenue increased from $1.87 per lb. to $2.15 per lb. for the most recent quarter. Segment contribution was however up 537 percent. Growth was derived from a return in food service, demand for whole birds and branded products. As in the second quarter of 2022 increases in feed and logistic costs detracted from earnings.


In commenting on Corporate results Jim Snee, Chairman and CEO stated "We delivered another quarter of record sales and double-digit operating income growth. In the current environment, delivering seven straight quarters of record sales and four consecutive quarters of earnings growth is a notable achievement and speaks to the effectiveness of our strategy and the importance of our brands in uncertain times. Our team's execution played a pivotal role in our growth this quarter, as together, we overcame significant challenges, including continued broad-based inflationary pressures, persistent upstream and downstream supply chain disruptions, limited turkey supply, and impacts in China from COVID-related restrictions and temporary plant shutdowns."


Snee continued "We continued to benefit from our balanced business model during the quarter, led by outstanding contributions from Jennie-O Turkey Store and Refrigerated Foods. The Jennie-O Turkey Store segment significantly outperformed our profit expectations for the quarter as the team managed limited turkey supply effectively and maximized operational performance. Refrigerated Foods delivered double-digit, value-added earnings growth on retail and foodservice items, more than offsetting lower commodity profitability. Similar to last quarter, impressive performance from these businesses helped mitigate higher input and supply chain costs across all segments”.


Snee concluded, "Consumers and operators continued to engage with our brands due to their value, convenience and versatility. Our strategy of building a portfolio with both premium and value offerings continued to serve us well as macroeconomic conditions pressure some of our customers, consumers and operators. Our teams remain keenly focused on the long-term needs of the business, our strategic priorities and protecting the equity of our leading brands." 


In relation to the Jennie-O Segment, Snee observed “As anticipated, volume and sales declined as a result of the supply impacts on the company's vertically integrated supply chain from highly pathogenic avian influenza (HPAI). Foodservice and whole-bird sales increased due to favorable pricing, partially offsetting lower commodity and retail sales. Higher commodity prices and foodservice sales drove the substantial improvement in contribution”


Hormel Foods posted total assets of $13,140 million on July 31st of which $6,738 comprised goodwill and intangibles. Long-term debt was $3,448 against an intraday market capitalization of $27,660 million. HRL has traded over the past 52 weeks in a range of $40.48 to $55.11 with a 50-day moving average of $48.92.  HRL trades with a forward P/E of 24.2 and a beta of 0.1.  For the trailing 12-month period, operating margin attained 10.0 percent and profit margin 7.7 percent.  The company has generated returns on assets of 6.8 percent and on equity 13.7 percent. HRL closed at $50.38 on August 31st but fell sharply at the open following the release to $47.25 on September 1st.


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