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McCormick & Co.’s fiscal second-quarter profit fell 2.2% as it booked transaction costs associated with its completed acquisition of Wuhan Asia-Pacific Condiments Co. Ltd. (WAPC) and experienced lower industrial demand from quick service restaurants in North America and China.
Based on WAPC transaction costs and lower demand from quick service restaurants for its industrial business in the fiscal third quarter, McCormick is forecasting fiscal 2013 earnings of $3.13 to $3.19 a share, which is lower than its previous projection of $3.15 to $3.23 a share. Excluding these factors, the company expects to grow underlying earnings per share at a double-digit rate in 2013.
With the addition of WAPC, McCormick raised its projected fiscal year 2013 sales growth by one percentage point, and now expects to grow sales 4% to 6%.
For the second quarter, McCormick’s net income fell to $78.6 million, or 59 cents a share, from $80.4 million, or 60 cents a share, a year earlier. The latest results included 2 cents a share of transaction costs associated with the completion of the WAPC acquisition.
Second-quarter net sales rose 2% to $1 billion and in local currency the increase was 3% when compared to the year-ago period.
McCormick’s consumer business sales grew 4% when compared to the second quarter of 2012. In local currency, sales grew 5% with 3% of the increase a result of higher volume and product mix.
Industrial business sales fell 1% when compared to the second quarter of 2012. In local currency, sales were up slightly from the year-ago period, with a 1% increase from pricing actions, offset in part by lower volume and product mix.
“Our industrial business grew sales to food manufacturers and food service distributors in the second quarter. While we had lower demand from quick service restaurants in North America and China, we expect this situation to improve in the fourth quarter based on our new product pipeline and latest outlook,” said Alan D. Wilson, chairman, president and CEO.
Wilson added that the company’s Comprehensive Continuous Improvement (CCI) program, is expected to deliver at least $50 million in cost savings. Also, with the integration of WAPC underway, the company expects an approximately 60% boost in sales in the China market.
For the third quarter, McCormick expects earnings per share to be comparable to the year-ago result of 78 cents a share.