McCormick and Co. is spicing up its service.
The Sparks-based company is in the process of instituting a restructuring plan, grooming its industrial side and sprucing up its consumer appeal.
“On the industrial side, [McCormick] got rid of a lot of customers that contributed only marginally to its top and bottom lines,” said Ann Gilpin, equity analyst for Morningstar, a financial news Web site. “This reduced its base by about 27 percent.”
During 2006, the company expanded its reach by acquiring Simply Asian and Thai Kitchen for $97 million in cash.
“McCormick has a strong image as a flavor company, but the acquisition places them in a different category ? with other packaged-food companies,” Gilpin said. “It?s a bit unusual but probably strategic.”
Although restructuring is mostly operational with new factory lines, consumers will see gravity-fed shelving ? something along the lines of Campbell?s Soup displays.
The display has expanded to only a few thousand stores, but the rest will roll into stores next year, she said.
In McCormick?s financial report, the company projected total restructuring charges through 2008 remaining between $110 million and $130 million, with a $50 million annual savings as a goal.
The company also said the restructuring was on schedule, but declined to comment until the most
recent earnings report comes out Feb. 28.
Gilpin said restructuring charges will still be significant in 2007 and keep operating margins below 11 percent.
“But on a longer term, I can see the margin returning to the company?s normal levels of 13 [percent] and 14 percent,” she said.
Despite competitive advantages, McCormick is in a slower growth category as a spice company, Gilpin said.
“I would expect the stock to go up, but not an excessively moving stock,” she said.
McCormick is part of The Examiner Top 10, which follows the stocks of 10 of the largest publicly held companies in the Baltimore region.
