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McCormick reports higher sales, lower profit in fourth quarter

McCormick & Co. Inc. saw profit slip in the fourth quarter, but sales jumped 5% as consumers doing more home cooking drove up demand for spices.

The Hunt Valley-based spice and flavorings giant said Thursday that sales rose 5% for the full year as well, to $5.6 billion, compared with 2019. The annual results were driven by a 10% jump in consumer sales. But sales to restaurants and food service customers, many of which have struggled during the coronavirus pandemic, declined by low single digits for the year, the company said.

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Shares of McCormick fell 3.3% Thursday to close at $91.02 each.

Lawrence E. Kurzius, McCormick’s chairman, president and CEO called the spice maker’s performance during the 2020 health crisis “extraordinary.”

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“We delivered strong results despite the disruption caused by the COVID-19 pandemic proving the strength of our business model, the value of our products and our capabilities as a company,” Kurzius said in an announcement.

For the quarter that ended Nov. 30, sales rose to $1.6 billion, compared with $1.5 billion in the final quarter of 2019.

Sales met Wall Street analysts’ expectations, with weaker-than-expected sales to consumers offset by stronger-than-expected commercial sales in the fourth quarter. Sales to consumers were driven by an increase in cooking at home and led by the Americas and Europe, Middle East and Africa regions. All global regions contributed to growth to commercial customers.

Quarterly net income fell to $200.7 million, or 74 cents per share, compared with $213.4 million, or 79 cents per share, in the fourth quarter of 2019.

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When adjusted for transaction costs and other charges, earnings for the three-month period decreased to 79 cents per share compared with 81 cents per share in the third quarter of 2019, largely because of higher brand marketing costs. The adjusted results of 79 cents per share missed Wall Street analysts’ forecast of 81 cents per share.

“This was a disappointing quarter ... especially considering the softer sales in the consumer division,” John Boylan, a senior equity analyst for consumer staples at Edward Jones, said in a report. “Most other companies thus far have had higher-than-expected demand and profits compared with forecasts, with more people eating at home due to coronavirus lockdowns.”

Boylan, who has a hold rating on McCormick’s stock, said overall costs came in a bit higher than anticipated.

“These quarterly results give us more of a wait-and-see approach to how the overall year unfolds,” he said.

The spice maker said it expects sales to grow by 7% to 9% in fiscal 2021, including sales from recent acquisitions Cholula and flavorings manufacturer FONA.

McCormick finalized its purchase of the parent company of Cholula Hot Sauce for $800 million in cash at the end of November. In December, the company announced the acquisition of natural flavorings company FONA International for $710 million in cash, a move expected to strengthen its position supplying makers of health and performance nutrition products such as protein drinks.

“The breadth and reach of our portfolio and the investments we have made, and continue to make, positioned us well to actively respond to changing consumer behavior and capitalize on new opportunities,” Kurzius said in the announcement.

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