McCormick & Co.’s results decline
Compared to the same period last year, when the company made $222.9 million, or 83¢ per share, net income for the quarter that ended on August 31 was $170.1 million, or 63¢ per share on the common stock. This is a 23% decrease.
Sales for the quarter increased to $1.68 billion from $1.59 billion in the previous year.
Brendan M. Foley, president and chief executive officer, stated during a conference call with securities analysts on October 3 that “our results were in line with our expectations across our business, notwithstanding challenges for our Consumer segment in Asia Pacific or APAC, where the pace of China’s economic recovery has been slower than previously anticipated.”
Sales in the company’s consumer segment increased marginally to $937.1 million from $927.9 million in the prior year, but operating income for the business unit decreased to $173.3 million from $183.7 million. Sales by segment rose by 1%, with pricing accounting for 5% of the gain and volume falling by 4%. The company claims that the reduced volume is the result of a 2% decline in the Kitchen Basics divestment and a 2% decline in the China Consumer division.
The sector sales for Flavor Solutions increased by 12% to $747.6 million from $667.7 million. From $54.9 million in the prior year to $77.8 million during the quarter, operating income increased. Volume contributed 1% and pricing 11% to the increase in sales.
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According to Mr. Foley, “the third quarter represents our tenth consecutive quarter with double-digit constant currency sales growth.” “Price actions in all three regions drove our growth. We have set our prices to account for inflation in the current year and are working to make up for the two years in which our pricing fell short of costs.
Looking ahead, Mr. Foley stated that McCormick’s fourth-quarter performance will also be impacted by China’s rebound.
When paired with its year-to-date performance, “China’s growth… is expected to be less than originally anticipated, which has led to a lower full-year 2023 benefit than we originally expected,” he stated.
Chief financial officer Michael R. Smith continued, “At the top line, we continue to expect 5% to 7% growth, and given the slower-than-expected China recovery, we anticipate our results will be closer to the middle of our guidance range.” The main drivers of growth are the results of price measures from the previous year and the impact of new ones in ’23.
The fourth quarter is going to see further obstructions to volume growth.
Price elasticities that are consistent with 2022 at lower levels than we have historically experienced, but in keeping with the current environment, are among the elements that are projected to effect our volume and product mix for the year, according to Mr. Smith. “In August of last year, we divested our Kitchen Basics company and
“We maintain our estimate that the DSD exit from the Americas Consumer segment and the private label Flavor Solutions discontinuation in EMEA will have an approximate 1% impact on the year. These events started to affect us in the second quarter of 2023.”