Hormel Foods Corp. on Thursday lowered its fourth quarter earnings guidance and full-year outlook as the Spam maker braces for continued headwinds in the global pork and turkey markets.
The Minnesota-based company expects fiscal 2023 sales to be between $3.1 billion and $3.6 billion, down as much as 4% from last year. Hormel also anticipates a weaker fourth quarter due to raw material input costs and dampened demand in its retail and international segments.
Soft prices offset sales volume growth in the third quarter as Hormel, owner of brands such as Jennie-O turkey and Skippy peanut butter, grappled with unfavorable pork and turkey commodity markets and supply chain disruptions from the shutdown of a third-party logistics provider.
Price volatility has wreaked havoc on meat producers this year. Tyson Foods, JBS S.A. and WH Group, the parent company of Smithfield Foods, all reported losses in the latest quarter as the companies struggled with high feed costs and low pork and chicken values.
Like other meat companies, Hormel is optimistic about the rest of the year as cost-cutting measures take effect and markets begin to stabilize.
Jim Snee, chairman, president and chief executive officer, said in an earnings call that Hormel implemented changes to reduce its inventories, improve its Planters snack business and bolster margins compared to last year.
“We expect a strong finish to the year from this team, driven by growth from premium items, further recovery in turkey, and as the team leverages [food service] capabilities in the K-12 and college and university channels this fall,” Snee said in the earnings call.
Despite the challenging environment, Hormel grew sales volumes across all of its segments in the third quarter, delivered net earnings in line with last year and made progress addressing short-term obstacles in the business.
Still, Hormel’s international results more than offset the gains in the U.S. business due to volatile commodity prices, soft consumer demand in China and an unfavorable arbitration ruling with a third-party. The segment posted a profit of $12.2 million, which is down 50% from a year ago.
The company reported a pre-tax payment of $70 million as a result of a commercial dispute with an unnamed third-party, according to a recent investor filing. The one-time payment is expected to be made in the fourth quarter.
The shutdown of a third-party logistics provider also led to “shortages, incremental logistics costs and elevated levels of distressed inventory,” CFO Jacinth Smiley told investors.
Third quarter net earnings fell 25% to $162.7 million, or 30 cents per share.
“We believe our continued investments into our brands, disciplined financial strategy and balanced approach across our businesses position us well for future growth as we close a challenging 2023,” Snee told investors.
Hormel is expected to give another update on its fourth quarter assumptions and outlook at its upcoming investor day scheduled for Oct. 12 at the New York Stock Exchange.