Sometimes, to go forward, you have to take a step back.
For Sparks-based McCormick & Co., a 33 percent second-quarter drop in net income was an expected hit for the international spice company, which is undergoing a restructuring plan. As part of a strategic growth initiative, the hit is expected to pay off down the road in the form of $30 million in cost-saving measures.
Rolled out in 2005, the three-year restructuring plan involved cutting back McCormick?s customer base and product line in the U.S., while continuing expansion overseas. This includes the acquisition and growth of Simply Asia Foods.
“McCormick?s dominant scale and command over the spice and seasoning market make for a wide economic moat,” wrote Ann Gilpin, an analyst for Morningstar, in her company report June 19. The company?s “strategy is to expand profit margins through internal growth, restructuring efforts and bolt-on acquisitions.”
For the second quarter, McCormick reported that net sales were up 7 percent, totaling $687.2 million, up almost $50 million from the same quarter in 2006. However, profits dropped to $41 million, a drop of about $20 million compared with the same time last year.
“Our sales and earnings for the second quarter exceeded our expectations,” Robert J. Lawless, chairman and chief executive officer of McCormick, said in a statement. “With a strong first half [of the fiscal year], we expect to grow earnings per share 9 to 11 percent on a comparable basis, an increase from our original projection of 8 to 10 percent.”
While more restructuring charges of around 18 cents per share are expected for the year, the company forecasts total earnings per share to be between $1.69 and $1.73, up from an original estimate of $1.67 to $1.71.
Once completed, the total restructuring plan is expected to cost from $130 million to $150 million.
McCormick & Co. is part of The Examiner Top 10, a portfolio of 10 of the largest publicly traded companies in the Baltimore region.
