Lower hog costs helped fuel a 17 percent increase in first-quarter profits at Hormel Foods Inc. Jeffrey Ettinger, Hormel CEO also cited a 15 percent increase in sales of the company's SPAM meats. The Austin, Minn.-based company said net earnings for the first-quarter ended Jan. 27 were $88.2 million compared with $75.3 million in the same period a year ago.
"We're off to a good start," Ettinger told investors. "All five segments reported top-line and bottom-line growth." Leading the way was Hormel's refrigerated foods segment, benefiting from lower hog input costs ($40 per hundredweight compared with $46 last year) and higher sales of value-added products. Operating profit in the segment rose 50 percent over the first quarter last year.
Grocery products delivered higher-than-expected results, with operating profit up 10 percent, due to what Ettinger called "explosive growth" of the Hormel Compleats microwave product line, which was $16 million of the segment's $22 million sales surge. A 15 percent increase in sales in the SPAM family of products, including SPAM singles, also boosted the segment's success.
Lower hog costs have offset some of the financial pains caused by rising feed costs; the company expects to spend some $80 million for feed grains this year, double its earlier projection. The company expects lower hog costs to continue through the latter part of the year. Hormel agrees with USDA projections that pork production will increase by 4 percent, Hormel CFO Jody Feragen said.