Spice and flavorings maker McCormick & Co. Inc. boosted sales and profit in the first quarter, benefiting from tax reform and its acquisition of the maker of French’s Mustard and Frank’s Red Hot sauce.
The Sparks-based company also announced Tuesday that it would share some of those tax savings with eligible hourly employees in the form of $1,000 one-time bonuses in May. It also said it would accelerate hourly wage increases.
McCormick reported Tuesday that its sales jumped 19 percent to $1.2 billion in the first three months of the year, thanks to strength in both sales to consumers in stores and sales of flavorings to food manufacturers.
Sales from Reckitt Benckiser Foods, acquired in August, and Italian flavorings maker Enrico Giotti SpA, purchased at the end of 2016, added 12 percent to the sales increase. In the first quarter, U.S. sales swelled 22 percent, thanks largely to the Reckitt Benckiser brands French’s and Frank’s, as well as from price increases, the introduction of new products and wider distribution.
“It was a solid quarter, in our view, with the integration of RB Foods off to a good start and healthy sales growth in both its consumer and industrial segments,” Brittany Weissman, a consumer analyst with Edward Jones, said in a report Tuesday. “We were pleased to see McCormick's underlying business show strength during the quarter, especially in a challenging environment where other packaged food companies have struggled.”
Shares of McCormick share rose 38 cents to close Tuesday at $107.35 each.
McCormick reported income of $422.6 million, or $3.18 per share, in the quarter that ended Feb. 28, compared with net income of $93.5 million, or 74 cents per share, in the first quarter of 2017. Earnings for the current quarter included the favorable impact of U.S. tax reform legislation. Excluding that impact, adjusted earnings of $1.00 per share beat Wall Street’s expectations of 88 cents per share.
“All over the world, people desire great-tasting foods and drinks with rich, authentic flavor,” said Lawrence E. Kurzius, McCormick chairman, president and CEO, in a statement. “And we deliver flavor across all markets and through all channels.”
The first quarter’s results come after what Kurzius called a milestone year. McCormick is benefiting from strong consumer sales around the world, thanks to its recent acquisitions, and strong growth in the Asia-Pacific region led by China, he said.
McCormick also is seeing increased demand for flavorings from quick-service restaurants in Europe, the Middle East, Africa and the Asia-Pacific regions, he said.
The spice maker said Tuesday it expects sales to grow 13 percent to 15 percent in 2018.
In addition to the employee bonuses, McCormick said it plans to use the rest of its tax benefit “to make strategic investments to drive growth, return cash to shareholders, and pay down debt.”