McCormick reports 2% rise in Q1 net income

US-based spices and seasonings manufacturer McCormick has reported that its net income for the first quarter of 2013 increased by 2% to $76m, compared with $74.5m in the same quarter in 2012.

The increase in net income was driven by strong results in the company’s consumer business unit, but was weighed down by weaker performance in the industrial segment and tough margins.

Net sales in the quarter ended 28 February 2013 increased by 3% to $934.4m, compared with $906.7m for the corresponding period in the fiscal 2012, due to pricing actions taken in response to higher material costs.

The increase in net sales was also driven by 7% growth in consumer business sales on strong volume and product mix.

McCormick stated that the volume and product mix for the consumer business increased 5%, driven primarily by product innovation and brand marketing support, with increases in each of the three geographic regions: the Americas, Europe, Middle East and Africa (EMEA) and Asia/Pacific.

Consumer sales in the Americas, Europe, Middle East and Africa (EMEA) and Asia/Pacific increased by 7%, 4% and 13% respectively.

For the industrial business, volume and product mix declined 5%, mainly due to weaker demand from quick service restaurants and a strong growth rate in the first quarter of the previous year.

McCormick chairman, president and CEO Alan Wilson said, "Demand has been weak in certain markets, including quick service restaurants in the US and China, although we expect some recovery in the upcoming quarters."

Operating income of $112m was comparable to the same period a year ago, with higher sales and cost savings from the company’s Comprehensive Continuous Improvement (CCI) programme, but was offset by the unfavourable impact of higher material costs and an increase of about $5m in retirement benefit expense.

In the first quarter, cash flow from operations totalled $32m, compared with $23m in the corresponding period in 2012.

For the second quarter of 2013, the company plans to increase brand marketing support by approximately $5m, and expects the continuation of higher material costs and an unfavourable impact of approximately $5m from increased retirement benefit expense.

The company reaffirmed its expectation of sales increase of 3% to 5%, primarily from higher volume and product mix, and expects a minimal impact of foreign currency exchange rates based on current rates.

McCormick plans to update its 2013 fiscal year outlook following the completion of the previously announced agreement to acquire Wuhan Asia Pacific Condiments, which is expected to occur in mid-2013.

McCormick, headquartered in Maryland, US, is a manufacturer, marketer and distributor of spices, herbs and flavourings for retail, commercial and industrial markets.