Hormel Foods Corp. recently reported results for the fourth quarter of fiscal 2020. Despite “multiple challenges,” Jim Snee, chairman of the board, president and chief executive officer, said Hormel grew sales in all four of its segments, which speaks to the strategic balance built into the company.
“In several of our domestic businesses, strong demand for our products exceeded the available supply,” he said. “From a bottom-line perspective, our experienced leadership team managed through the incremental supply chain costs we incurred related to the pandemic, which was the largest driver of our earnings decline.”
Growth in the international segment was also incredibly strong, particularly in China, where the company drove balanced growth between the retail and foodservice channels, Snee added. Consistent with industry trends, Hormel’s foodservice business showed declines in the past quarter. Snee said the company will continue to support the distributor and operator community during the challenging economic environment.
"This most recent surge of COVID-19 cases in communities does create a level of uncertainty in a number of areas, notably labor availability, customer demand and raw material markets. Our company has adjusted to these conditions and will continue to invest to meet the needs of our team members, customers, consumers and operators," he said.
Looking ahead to 2021, Snee said he is optimistic about generating sales and earnings growth in fiscal 2021.
“Our One Supply Chain team delivered steady production improvements throughout the quarter, and our production capacity for key product lines is structurally higher as we move into next year. The balance we have across the retail, deli, foodservice and international channels gives us confidence in our ability to perform well in many different economic scenarios.”
Executive summary – Q4 2020
- Volume of 1.2 billion lb., down 2%; organic volume down 3%
- Net sales of $2.4 billion, down 3%; organic net sales down 4%
- Operating margin of 11.4% compared to 12.8% last year
- Effective tax rate of 15.9% compared to 21.0% last year
- Diluted earnings per share of 43 cents, down 9% from 47 cents
Executive summary - Fiscal 2020
- Volume of 4.8 billion lbs., up 1%; organic volume up 2%
- Net sales of $9.6 billion, up 1%; organic net sales up 2%
- Operating income of $1.1 billion, down 8%
- Operating margin of 11.5% compared to 12.6% last year
- Diluted earnings per share of $1.66, down 8%; down 2% to adjusted diluted earnings per share last year
- Cash flow from operations of $1.1 billion, up 22%
- Operating free cash flow of $800 million, up 21%
"As we enter fiscal 2021, we are witnessing another dramatic increase in COVID-19 cases across the nation," Snee said. "Employee safety remains our top priority, and we are doubling down on our awareness initiative, KEEP COVID OUT!, which reinforces the importance of taking preventive measures at our production facilities and in our communities where we work and live."
For the full year, Hormel reported that it absorbed more than $80 million in incremental supply chain costs primarily related to lower production volumes, employee bonuses and enhanced safety measures in its production facilities. The company estimates that most of the incremental supply chain costs are temporary and can be minimized after the pandemic subsides.