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McCormick reports slight increase in sales, earnings

Sales and earnings at McCormick & Co. ticked up slightly in the first quarter as strong demand in China offest sluggish sales in the United States and the United Kingdom, the Sparks-based company said Tuesday.

McCormick reported that it earned $93.5 million, or 74 cents per share, compared with $93.4 million, or 73 cents per share, in the same period a year earlier. On an adjusted basis, earnings rose to 76 cents per share, beating Wall Street expectations by a penny.

Shares of McCormick fell nearly 3 percent Tuesday afternoon to close at $98.43 each.

Sales during the three months that ended Feb. 28 rose 1 percent to $1.04 billion from $1.03 billion a year earlier, McCormick reported.

"Our first quarter financial results were a solid start to the year delivering profit results in line with our expectations," said Lawrence E. Kurzius, McCormick president and CEO, in the company's announcement.

Sales to consumers through supermarkets and other stores benefited from momentum in China and the impact of recent acquisitions, but were partially offset by sluggish retail sales in the United Kingdom and weakness in the U.S. food industry since the beginning of the year, Kurzius said. McCormick acquired Gourmet Garden, an Australian maker of packaged herbs, in April 2016, and Cajun Injector, a maker of injectable marinades and seasonings, in September.

"Overall, it was a decent quarter," said Brittany Weissman, a consumer analyst for Edward Jones in St. Louis. "McCormick continues to post better growth than other spice peers."

The company is reaping the benefits of an ongoing cost savings program. The company said it is on track to lower costs and reach about $100 million in cost savings this year.

But that's been tempered by weak food industry trends, especially a slowdown in grocers' "center of the store" categories.

"There's been a general slowdown in food since the beginning of the year, and they are not the only company to see that," Weissman said.

For McCormick, other contributing factors include a later Easter holiday this year compared with last year and unseasonably warm winter weather that cut into sales of products such as chili seasonings and gravy.

Though spices have performed better than other food categories, it still was impacted by what Kurzius called a short-term industry slowdown, in a conference call Tuesday. A few weeks in to the second quarter, he said, "we've seen an uptick in our sales of U.S. consumer products."

Although the spice maker's U.S. market share declined in some channels, the company is seeing better results in other channels, such as warehouse club stores, ethnic grocery stores and online.

Sales to industrial consumers, such as food service companies and manufacturers, saw solid growth as demand picked up from quick service restaurants in the Asia/Pacific region and for customized flavors in the Americas, Kurzius said.

"Taste continues to rank number one in deciding what consumers choose to eat," Kurzius said.

Also Tuesday, McCormick moved closer to relocating its global headquarters from Sparks to a nearby site in Hunt Valley and announced plans to open a new distribution center in Mississippi.

The Baltimore County Council briefly discussed state and county financing for the new corporate campus at the corner of Shawan and York roads. Under a 2015 deal to retain the company, the state would extend a $2 million loan to McCormick for relocation and renovation costs. The county agreed to loan McCormick $200,000 and spend $1.8 million for improvements to Shawan and Schilling roads so that vehicles and pedestrians can access the building.

The council is expected to approve a resolution endorsing the state loan at its April 3 meeting.

According to a fiscal note prepared by the county auditor's office, both the state and county loans have 7-year terms and 3 percent interest rates. The loans would be forgiven if the company keeps 800 workers at the corporate headquarters and 1,900 jobs in Maryland. The relocation is expected be completed in 2018, according to the fiscal note.

Meanwhile, McCormick agreed to a 10-year lease on a 615,000-square-foot warehouse in an industrial park in Mississippi, just south of Memphis, Tenn. The company will invest $6 million in the center where it will hire 48 workers to improve service to its customers and create space for growth, said Scott Simmons, a McCormick vice president.

Mississippi's Marshall County granted property tax breaks for building and equipment worth $9.2 million over 10 years.

Baltimore Sun reporter Alison Knezevich and the Associated Press contributed to this report.

lorraine.mirabella@baltsun.com

lorraine.mirabella@baltsun.com

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