McCormick reports 11% quarterly profit increase

McCormick & Co. enjoyed a double-digit increase in profit during the last quarter on the strength of new products, higher sales and price increases, the Sparks-based spicemaker reported Thursday.

Net income for the March-to-May period rose 11 percent to $73.6 million, or 55 cents per share, from $66.2 million, or 49 cents per share, in the corresponding period last year.

Sales in McCormick's consumer and industrial businesses increased nearly 11 percent to $883.7 million, up from $798.3 million.

New spices and meals, increased marketing and new distribution channels contributed to higher earnings, McCormick said. The company recently launched a major advertising campaign targeting Hispanics in the United States.

McCormick said it offset increases in the cost of materials, such as pepper and garlic, by raising prices and continuing to cut operation costs and improve production. The company's cost-cutting plan is expected to save $45 million this year, up from the initial $40 million estimate.

Retail and industrial customers paid an average of nearly 5 percent more for products, which contributed to higher sales, the company said.

McCormick Chairman and Chief Executive Alan D. Wilson said Thursday that consumers are paying higher prices, but "our products help consumers make less expensive meals."

Wilson said the company has not decided whether to raise prices in the second half of the year. He told analysts that pricing is the "last lever to pull."

"Our first approach is to do what we can from a productivity standpoint" to reduce costs, Wilson said.

The company expanded its foothold in two markets during the quarter.

It acquired an 85 percent stake in a joint venture with India's Kohinoor Foods Ltd. for $115 million. McCormick also bought a Polish food company for $291 million.

With the two acquisitions and continuing growth in emerging markets, McCormick expects those regions to contribute 12 percent of sales by 2012. Emerging-market sales last year contributed 9 percent.

McCormick lowered earnings guidance for 2011 by 6 cents due to $9 million in costs related to the two transactions. The company said it expects to spend at least $6 million in the third quarter on marketing.

The company expects to post earnings of $2.74 to $2.79 per share for fiscal year 2011.

"We're continuing to invest in consumer advertising so we're spending more behind our brands than we did in the second half of last year," Wilson said. "We're projecting healthy growth in sales and operating income for the rest of the year."

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