The impact of the new coronavirus on McCormick & Co.'s China operations remains unknown and executives are closely watching efforts to contain the outbreak.
China is the Hunt Valley-based spice maker’s second-largest market in terms of sales and it has three plants there, including a manufacturing facility in Wuhan, where the virus began and remains centered.
“Our concern, first and foremost, is for the health and safety of our employees and around product safety,” McCormick President and CEO Lawrence E. Kurzius said Tuesday as the company announced financial results for the end of last year. “A lot of our efforts and responses are directed to that.
“It’s too early to really know what the impact is going to be.”
Chinese officials have reported more than 4,500 cases and 106 deaths. The illness has spread to other countries, including the United States, where five cases, all among travelers, have been confirmed in California, Washington, Illinois and Arizona. Maryland health officials are testing a patient suspected of being infected.
The CDC has said Americans remain at low risk for infection from the virus. All of the confirmed cases are in people who recently traveled from China.
McCormick does not break out and disclose its sales in China because that business makes up less than 10 percent of revenue. But it is a profitable and growing segment and an important part of McCormick’s focus on emerging markets.
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All McCormick’s Chinese plants, located as well in Shanghai and Guangzhou, are closed for the Chinese New Year holiday. But the Chinese government is expected to allow the plants to reopen on their regular schedule, Kurzius said.
That could mean Monday, or in Shanghai, where officials imposed special restrictions, by Feb. 10, he said. The plants get raw materials and distribute products only within the Chinese market, he said.
“So far it’s not a business interruption, and it really remains to be seen how far this goes,” Kurzius said.
Fewer people traveling, going out to eat or going shopping at grocery stores “is not a positive for business,” he said. “We can’t really quantify it right now. We think more facts will come out in coming days.”
The uncertainty spooked the market and McCormick shares tumbled nearly 4% to $166.06 each. But even with that question about China, McCormick said it expects sales this year to grow from 2% to 4% compared with 2019, driven by new products, brand marketing and expanded distribution.
The spice maker ended its fiscal year with sales up 1% to $5.3 billion compared with the year before.
For the three months that ended Nov. 30, the company reported that sales grew 1% to $1.48 billion, while its profit dipped slightly. McCormick said it earned $213.4 million, or $1.59 a share, in the three months that ended Nov. 30, compared with $214 million, or $1.60 a share, a year earlier.