McCormick reports drop in Q4 net income

US-based spice and seasoning maker McCormick & Company’s fourth quarter net earnings fell by 1.4% to $131.7m as a result of acquisition-related transaction costs and higher raw material costs.

Revenue, on the other hand, jumped 13% to $1.1bn as a result of higher pricing in both its consumer and industrial segments. The company’s largest business, the consumer segment, saw a 14% increase in sales to $724.7m, compared with $638.7m in the previous year. The industrial segment, which sells to restaurants and food manufacturers, reported a 13% increase in sales to $386m, compared with $340.8m in the year-ago period. According to the company, both these segments experienced increased revenues due to favourable volumes, product mix and higher pricing.

During the fiscal year 2011, the company’s total revenue rose by 11% to $3.7bn due to good volumes, product mix, pricing actions as well as favourable currency rates translation. Operating income for the full year rose 6% to $540m; however, the increase included the $11m unfavourable impact of transaction costs related to acquisitions completed in 2011.

To expand its presence in overseas markets, the company completed the acquisition of Polish seasonings and spice maker Kamis for $286m last year and entered into a joint venture with India-based Kohinoor Foods to market and sell basmati rice in the Asian country.

McCormick chairman, president and CEO Alan D Wilson said the fourth quarter financial results were a strong finish to fiscal year 2011, with fourth quarter sales growing at a double-digit rate and achieving increased operating income. "In 2012 we expect at least 13% of sales to come from emerging markets, up from 6% in 2006," Wilson added.

The company, which has struggled with higher costs of raw materials, particularly pepper and cinnamon, announced that it would continue to increase prices and lower costs, as well as stepping up efforts in emerging markets such as India and China.