McCormick & Co. plans to raise prices in response to continuing increases in the costs of raw materials and packaging, company officials said Wednesday.
Still, the performance of the Sparks spicemaker has been on target, said Alan D. Wilson, its chairman and chief executive.
"We're navigating through a period of pretty steep cost escalation and continuing to meet objectives," he said.
Net profits in the quarter that ended Aug. 31 fell 10 percent to $92 million, or 69 cents per share, the company reported, compared with $102.4 million, or 76 cents per share, during the same period last year.
Joyce Brooks, McCormick's vice president of investor relations, said the 2010 earnings reflected a one-time, favorable tax reversal of $14 million.
Sales grew 11 percent in the third quarter, better than the 5 percent recorded in the first half of the year, even though prices rose by 5 percent on average.
The company increased its investment in brand marketing support by 27 percent.
The company expects to cut $50 million in costs this year, up from earlier estimates of $45 million.
Agricultural commodity cost increases are expected to continue through 2012, Wilson said. As a result, McCormick raised prices for its products in the first quarter and plans to do so again in the fourth.
They will be the first fourth-quarter price increase in more than a decade, Wilson said. He said increases will be low on products such as extracts but could reach double-digit percentages on spices such as black pepper.
An estimated $10 million of the increased sales reported in the third quarter reflected advance purchases in anticipation of the fourth-quarter price rises, he said.
McCormick acquired Ohio-based Kitchen Basics, a brand of shelf-stable liquid stock, for $38 million in July. The company concluded its acquisitions of Kamis SA, a Polish manufacturer of spices and seasonings, and a joint venture with Kohinoor Foods Ltd., an Indian maker of basmati rice, in September.
McCormick also has expanded the range of products being sold at warehouse stores nationally, Wilson said. The company had had a full distribution line in warehouse clubs in the Mid-Atlantic region for several years, he said, and is adding baking items such as gravy mixes and flavor extracts.