Chief financial officer says company’s need to reformulate will result in higher feed costs
Hormel Foods expects to spend more money on animal feed in fiscal year 2020, due to a need to reformulate feeds, the company’s chief financial officer (CFO) said.
Speaking during a conference call with investors as the company announced its financial results of the first quarter of fiscal year 2020, Hormel Foods CFO and Executive Vice President Jim Sheehan said the company’s feed costs for the first quarter were flat when compared with the first quarter of fiscal year 2019. However, he said that is apt to change in the forthcoming quarters.
“We anticipate higher feed costs for the remainder of the year, driven by lower levels of protein in the corn crop relative to prior years,” Sheehan said on February 20. “This is requiring us to reformulate our feed with higher-cost ingredients.”
Hormel Foods is a major pork producer and is the parent company of Jennie-O Turkey Store, the second largest turkey company in the United States.
Hormel keeps eye on African swine fever
Sheehan, as well as Hormel Foods President and CEO Jim Snee, also addressed the impact that African swine fever (ASF) has had on its operations.
“African swine fever continues to impact global hog supply in China, southeast Asia and Europe. Worldwide demand for U.S. pork remains high with the industry setting an all-time record for exports in December,” Sheehan said.
Snee said that while international volume and sales increased for the first quarter, “primarily due to fresh exports and strong growth in China,” ASF has still had a negative impact on the company’s bottom line for the quarter.
“Segment profit declined by 20% as significantly higher pork prices negatively impacted our businesses in China and Brazil, in addition to our affiliated businesses in South Korea and the Philippines,” he explained.
However, Snee said the Hormel Foods team “continues to take the necessary pricing actions to offset price increases.”
For the fourth quarter, Hormel Foods reported net earnings of $242.9 million, up from the net earnings of $241.4 from the first quarter of fiscal year 2019.
