Release date -27062024

HUNT VALLEY, Md- McCormick & Company, Incorporated (NYSE:MKC), a global leader in flavor, today reported financial results for the second quarter ended May 31, 2024 and reaffirmed fiscal 2024 outlook.

Sales declined 1% in the second quarter from the year-ago period. In constant currency, sales also declined 1%. These comparisons reflect volume growth in Consumer, offset by volume declines in Flavor Solutions.

Operating income was $234 million in the second quarter compared to $222 million in the year-ago period. Adjusted operating income was $236 million compared to $235 million in the year-ago period.

Earnings per share was $0.68 in the second quarter as compared to $0.56 in the year-ago period. Adjusted earnings per share was $0.69 compared to $0.60 in the year-ago period.

For fiscal year 2024, McCormick reaffirmed its sales, operating profit, and adjusted earnings per share outlook.

President and CEO's Remarks

Brendan M. Foley, President and CEO, stated, 'We are pleased with our performance for the first half of the year, which was in line with our expectations and reflects the success of our prioritized business investments to drive improving results and trends. The investments we made in our Consumer segment drove substantial sequential volume improvement in the second quarter, leading to volume growth, and we expect continued momentum for the second half of the year. In Flavor Solutions, lower demand from some quick service restaurant and packaged food customers combined with the timing of customer activities, impacted our second quarter performance. We believe our collaboration and strong innovation pipeline with our customers will drive improved volume performance in the second half of the year.

'As we look ahead, we will continue to prioritize our investments in key categories and execute on the initiatives within our growth levers, including brand marketing, new products and packaging, category management, and proprietary technology. Notably, we expect our innovation pipeline across both segments combined with our brand marketing initiatives to accelerate our return to total volume growth. In addition, we remain well positioned with our cost savings initiatives to fuel investments as well as generate operating margin expansion. Our results for the first half of the year coupled with our growth plans, support our continued confidence in achieving the mid to high-end of our projected constant currency sales growth for 2024.

'Overall, we are confident in the sustained trajectory of our business, and in our ability to deliver on our 2024 outlook and long-term financial objectives. Our commitment is underpinned by our proven track record, our broad and advantaged global portfolio, our focus on high growth, profitable categories, our alignment with consumer trends, as well as our differentiated heat platform. Our business fundamentals are strong, and we expect to continue to deliver profitable growth and drive value for shareholders.'

'Lastly, I would like to express my gratitude to McCormick employees around the world, as they remain the cornerstone of our success. Their dedication, ongoing contributions, and the momentum they are driving into the business continue to energize me. Importantly, as a leadership team, we remain committed to elevating our power of people culture and to building the next generation of leaders and capabilities that will drive our success well into the future.'

Second Quarter 2024 Results

McCormick reported a 1% sales decline in the second quarter from the year-ago period with minimal impact from currency. This decline includes the impact of the Company's strategic decision to divest a small canning business and reflects a 1% volume decline attributable to lower customer demand and the timing of customer activities in the Company's Flavor Solutions segment, which more than offset volume growth in the Consumer segment.

Gross profit margin expanded 60 basis points versus the second quarter of last year. This expansion was driven by cost savings led primarily by the Company's Comprehensive Continuous Improvement (CCI) program. Selling, general, and administrative expenses increased from the year-ago period driven by increases in brand marketing, partially offset by CCI-led cost savings.

Operating income increased to $234 million in the second quarter of 2024 compared to $222 million in the second quarter of 2023. Excluding special charges, adjusted operating income was $236 million in the second quarter of 2024 compared to $235 million in the year-ago period. In constant currency, adjusted operating income was comparable with the year-ago period, gross margin expansion was offset by higher selling, general, and administrative expenses.

Income tax expense for the quarter included $20.2 million of net discrete tax benefits primarily associated with the recognition of a deferred tax asset related to an international legal entity reorganization.

Earnings per share was $0.68 in the second quarter of 2024 compared to $0.56 in the year-ago period. Special charges lowered earnings per share by $0.01 in the second quarter of 2024 and by $0.04 in the prior year period. Excluding these special charges, adjusted earnings per share was $0.69 in the second quarter of 2024 compared to $0.60 in the year-ago period. This increase was primarily attributable to the timing of a discrete tax benefit and higher income from unconsolidated operations, driven by strong performance by the Company's largest joint venture, McCormick de Mexico.

Net cash provided by operating activities through the second quarter of 2024 was $302 million compared to $394 million through the second quarter of 2023. The year over year decline was primarily driven by higher incentive compensation payments and the timing of cash tax payments.

Fiscal Year 2024 Financial Outlook

McCormick's 2024 outlook reflects the Company's commitment to strengthen volume trends and prioritize investments to drive profitable results and return to differentiated volume-led growth as the year progresses. The Company's CCI and GOE programs are fueling growth investments while also driving operating margin expansion. Currency rates are expected to unfavorably impact sales, adjusted operating income and adjusted earnings per share by approximately 1%.

In 2024, McCormick expects sales to range between (2)% to 0% compared to 2023, or (1)% to 1% on a constant currency basis. The Company expects a favorable impact from the prior year's pricing actions. Through the power of its brands and its targeted investments, the Company expects to improve volume trends as the year progresses and return to volume growth, absent any new macroeconomic headwinds. The Company's strategic decisions in 2023 to discontinue low margin business and divest a small canning business will impact volume growth in 2024.

Operating income in 2024 is expected to grow by 8% to 10% from $963 million in 2023. The Company anticipates approximately $15 million of special charges in 2024 that relate to previous organizational and streamlining actions. Excluding the impact of special charges in 2024 and 2023, adjusted operating income is expected to increase 3% to 5%, or in constant currency 4% to 6%, driven by gross margin expansion partially offset by a significant increase in brand marketing investments.

McCormick projects 2024 earnings per share to be in the range of $2.76 to $2.81, compared to $2.52 of earnings per share in 2023. The Company expects special charges to lower earnings per share by $0.04 in 2024. Excluding these impacts in 2024 and 2023, the Company projects 2024 adjusted earnings per share to be in the range of $2.80 to $2.85, compared to $2.70 of adjusted earnings per share in 2023, which represents an expected increase of 4% to 6%, or in constant currency 5% to 7%. For fiscal 2024, the Company expects strong cash flow driven by profit and working capital initiatives and anticipates returning a significant portion of cash flow to shareholders through dividends.

2024 Investor Day

The Company plans to host its Investor Day on October 22, 2024 in Hunt Valley, Maryland. At the event, members of McCormick's executive leadership team will discuss the Company's long-term strategy and financial outlook.

Business Segment Results: See full release at:

https://mccormickcorporation.gcs-web.com/news-releases/news-release-details/mccormick-reports-second-quarter-performance-reaffirms-2024

SOURCE McCormick & Company, Incorporated

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