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New products, acquisitions and expanded distribution boost McCormick's 4Q sales

New products, acquisitions and expanded distribution helped McCormick & Co. boost sales and earnings in the fourth quarter, the Sparks-based spice maker said Wednesday.

The company reported a profit of $157.4 million for the three months ended Nov. 30, up 5 percent from $149.2 million a year earlier. Earnings per share were $1.24, up 8 cents. Adjusted for special charges, earnings rose to $1.27 per share, meeting analysts' expectations.

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Shares of McCormick rose 1.9 percent to close at $95.79 Wednesday on the New York Stock Exchange.

Lawrence E. Kurzius, McCormick's president and CEO, said the business and its strategies continue to be in sync with consumers' demand for bold flavors, convenience and focus on fresh ingredients and health.

Sales rose 2 percent to $1.23 billion in the last three months of the fiscal year, with gains in sales to consumers but a 1 percent decline in sales of flavorings to industrial customers such as food manufacturers. When adjusted for currency fluctuations, sales in that segment grew 2 percent.

Sales from Gourmet Garden, an Australian maker of packaged herbs acquired in April, and Cajun Injector, a maker of injectable marinades and seasonings acquired in September, added 2 percent to the sales increase.

For its fiscal year, also ended Nov. 30, McCormick reported sales of $4.4 billion, a 3 percent gain. Kurzius said the year's results met each of the company's key financial targets, with brand marketing, new products, wider distribution and several acquisitions contributing to higher sales. The spice maker also has been reshaping its portfolio to offer more gluten-free and organic products, he said.

"That's pretty solid results, and they've done a lot to increase the marketing behind the brand and innovate," said Brittany Weissman, a consumer analyst with Edward Jones. "That's gained traction over the past year, and I would expect that to continue."

On a Wednesday conference call, one analyst asked about how a potential Trump administration border tax could affect McCormick's cost of importing raw materials.

Kurzius said tax code changes remain uncertain and "even our new president himself has made contradictory statements about a border tax, so we're a long way from knowing what the final tax proposal is going to be."

"As a company, we support a broad-based tax reform that makes our business more competitive on a global basis," he said. "To the extent that overall rates go down, it's certainly a good thing for us."

But many of the spice maker's raw materials are imported products that grow close to the equator, he said.

"Regardless of what our tax policy is, we're not going to be able to move the equator into the United States," Kurzius said. "To the extent that there's a border adjustment that includes those items, that's a negative for us."

Other analysts raised questions about data that shows accelerated market share losses for McCormick in the spice and seasonings category at U.S. retailers. But Kurzius countered that the data can be misleading because it leaves out some customers, such as member-only discount retailers and e-commerce. Data showing McCormick's sales growing at 2 percent and the category growing at a 5 percent rate is misleading, he said.

"We actually had very strong sales in unmeasured channels during that time," said Kurzius, adding that the industry data "understates our performance."

McCormick is not just matching category growth but exceeding it, he said, and expects to start gaining market share this year. Despite the apparent gap, U.S. consumer sales rose nearly 7 percent, with strong growth in McCormick and Lawry's brand spices and seasonings, recipe mixes and Simply Asia products.

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The company said it expects to reach earnings in the range of $4.02 per share to $4.10 per share in fiscal 2017 and is looking for sales to grow in the range of 3 percent to 5 percent. A cost savings program helped the company exceed $100 million in savings for the year, part of a goal to save $400 million by 2019.

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