Hormel Foods 2011 Annual Report Download - page 25

23
Hormel Foods Corporation
Va
l
ue
-
added
n
e
t
sa
l
es
f
o
r
JO
T
S
be
n
e
fit
ed
fr
o
m
subs
t
a
nti
a
l
i
nvestments
i
n med
i
a campa
i
gns to support the
Je
nni
e
-
O
Turkey Stor
e
®brand,
p
articularly in the latter half of fiscal
2010. These campaigns contributed to double-digit sales
g
rowth over fiscal 2009 across the retail, deli, and foodservice
business units during the fourth quarter. Sales of Jennie-O
T
urkey Store®retail turkey burgers and tray pack products
were part
i
cularly strong.
S
p
ecialt
y
Foods: S
p
ecialty Foods net sales increased 12.1
percent for the fiscal 2010 fourth quarter and 10.5 percent
for the twelve months compared to fiscal
2009
. Tonna
g
e
i
ncreased 12.2 percent for the quarter and 8.3 percent for the
t
welve months compared to fiscal
2009
. All three operatin
g
se
g
ments contributed to the top-line
g
rowth throu
g
hout fiscal
20
1
0
.
S
pecialty Foods segment profit decreased 6.4 percent for the
fiscal 2010 fourth
q
uarter but increased 17.9
p
ercent for the
year compared to fiscal 2009. All three operating segments
a
lso contributed to the pro
fi
t gains
f
or the year, but this
segment faced a challenging fourth quarter in fiscal 2010.
HSP reported stron
g
sales
g
rowth in chili, hash, stew, and
l
uncheon meat. However, h
ig
h raw mater
i
al costs ne
g
at
i
vely
i
mpacted the
g
ross mar
gi
ns on these
i
tems, result
i
n
g
i
n an
o
verall profit decline. D
C
B reported a profit increase due to
i
mproved sales of su
g
ar, su
g
ar substitute, and dyspha
g
ia
products.
C
FI experienced the lar
g
est profit
g
ains throu
g
hout
fiscal
20
1
0
. Fourth
q
uarter results also exceeded fiscal
2009
,
d
riven by contract packaging nutritional jar sales, which
were able to offset declines in nutritional
p
ouches and bulk
blend
i
ng
.
A
ll Other: All Other net sales increased 33.1
p
ercent for
t
he fiscal 2010 fourth quarter and 13.5 percent for the year
c
ompared to fiscal
2009
.
S
tron
g
export sales of the
S
PA
M
®
f
amily o
f
products generated the largest gains
f
or both the
f
ourth
q
uarter and
fi
scal year. Fresh
p
ork ex
p
orts were weak
d
uring much of fiscal 2010, but showed some improvement on
a
year-over-year basis in the
f
ourth quarter due to the impact
o
f the weak
g
lobal economy in fiscal
2009
and bans in place
related to the H1N1 flu virus durin
g
the
2009
fourth quarter.
Despite the stron
g
top-line
g
rowth, All
O
ther se
g
ment profit
d
ecreased
2
.5 percent and 5.4 percent for the fiscal
20
1
0
fourth
q
uarter and year, res
p
ectively, com
p
ared to fiscal
2009
. High raw material costs persisted throughout fiscal
2010, resulting in a significant reduction in export margins
c
ompared to fiscal 2009. Increased freight and marketing
e
xpenses were also incurred during fiscal 2010, but were pa
r
-
t
ially o
ff
set by
f
avorable currency rates and im
p
roved
p
er
f
or
-
mance from the Company’s China operations. The Company’s
i
nternational joint ventures also reported improved pro
fi
t
results overall, providin
g
a bene
fi
t
f
or the
f
ull year compared
t
o fiscal
2009
.
S
egment profit for Refrigerated Foods increased 22.2 percent
in both the fourth
q
uarter and twelve months of fiscal 2010,
compared to fiscal 2009. Strong cutout margins drove the
p
rofit increases for this segment throughout fiscal 2010, gen
-
eratin
g
substantial
g
ains for the Company’s pork operations
compared to fiscal
2009
. However, anticipated reductions in
overall ho
g
production resulted in a lower ho
g
supply durin
g
20
1
0
. This decline, combined with increased demand, kept
p
ork primals at an elevated level and reduced mar
g
ins in this
s
e
g
ment’s value-added businesses. Price increases were able
to recover a portion of these higher costs during
20
1
0.
T
he Company’s focus on value-added growth was evident
throughout fiscal 2010. The Meat Products business unit
experienced double-digit sales gains
f
or both the
f
ourth
q
uarter and
fi
scal year
f
or
H
orme
l
®
p
arty trays an
d
Ho
rm
el
®
r
etail
p
e
pp
eroni. New item introductions for both of these
p
roduct lines continued to grow the Company’s presence
i
n the home occas
i
on and snack categor
i
es. Natural Choic
e
®
d
eli meats also showed notable growth during fiscal 2010 in
b
oth the retail and
f
oodservice businesses. Additionally, the
Foodserv
i
ce bus
i
ness un
i
t was able to grow other key product
li
nes,
i
nclud
i
n
g
C
af
é
H
®
e
thni
c
m
ea
t
s
a
n
d
Aus
tin
Blues
®
bar
-
be
q
ue
p
roducts. The A
ffi
liated Business Units also contributed
t
o the im
p
roved sales results for fiscal 2010.
Inte
g
ration o
f
the
C
ountry Croc
k
®
c
hill
ed
s
i
de
d
i
s
h
bus
in
ess
was also completed during fiscal 2010, and efforts to restore
m
omentum to th
i
s product l
i
ne by co-market
i
ng the s
i
de
dishes as a com
p
lement to the Com
p
any’s
H
orme
l
®
refrig
-
e
r
a
t
ed
e
ntr
ees
a
n
d
Ll
o
yd’
s
®
barbe
q
ue
p
roduct lines were
successfu
l.
J
ennie-O Turke
y
Store:
J
ennie-O Turkey Store
(
JOTS
)
net
s
ales for the fiscal 2010 fourth quarter and year increased
19
.1 percent and 6.7 percent, respectively, compared to fiscal
2009. Tonna
g
e increased 19.3 percent for the fourth quarter
a
nd 5.1 percent
f
or the twelve months, compared to
fi
scal
2009
results. Improved value-added sales drove the top-line
i
ncrease for both the fourth quarter and
20
1
0
fiscal year,
i
ncreasing 1
8
.
2
percent and
8
.7 percent, respectively. Retail
whole bird sales were also particularly strong late in the year,
o
ffsetting declines in commodity meat sales.
JOTS experienced excellent profitability throughout fiscal
2010, with segment profit increasing 89.7 percent for the
f
ourth quarter and 65.3 percent for the year, compared to
fi
scal
2009
. Efficiencies achieved throu
g
hout its supply chain
a
nd other operat
i
onal
i
mprovements across the bus
i
ness
r
educed production costs, resultin
g
in these si
g
ni
fi
cant pro
fi
t
g
ains. Favorable commodity meat and whole bird pricin
g
also
c
ontributed to mar
g
in improvement for this se
g
ment in fiscal
20
1
0
. J
O
T
S
further benefitted from lower feed costs during
fi
scal
20
1
0
, including an unusually large hedging gain on its
o
pen grain positions during the fourth quarter, amounting to
a
n incremental
$
7.3 million over fiscal 2009
.