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Holiday Turkeys Boost Hormel Profit

Posted on: Tuesday, 28 February 2006, 06:00 CST

By Tom Webb, Pioneer Press, St. Paul, Minn.

Feb. 28--A big holiday season for the turkey business helped Hormel Foods to a 7 percent rise in quarterly earnings, and spurred a boost in the company's 2006 guidance, the company announced Monday. The Austin, Minn.-based maker of Spam, Jennie-O turkey, luncheon meat and chili earned $69.3 million, as sales rose 11 percent to $1.4 billion. The numbers beat analysts' forecasts. "We are off to a good start," said Jeffrey Ettinger, president and chief executive. Again this quarter, Hormel's Jennie-O Turkey Store came in big. Unusually high margins in the turkey business over the Thanksgiving-Christmas-New Year's quarter made it Hormel's most profitable unit, though not the largest. But those margins will decline later in the year as turkey numbers expand, Ettinger cautioned. Hormel acquired four smaller food companies in 2005, and it continues to have an appetite for more. It is already the No. 1 turkey processor in the world, and another popular turkey brand, Butterball, was recently put up for sale by its owner ConAgra Foods. Ettinger wouldn't discuss if Hormel was interested, but he dismissed an analyst's question about a potential antitrust problem. "I don't know that there's any (operating segments) we've conceded we can't grow through acquisitions," Ettinger said. The company raised its full-year guidance by 4 cents a share, to a range of $1.90 to $2 a share. Hormel shares closed down 46 cents to $34.00. Energy and freight costs rose $15 million in the quarter, which hurt the bottom line, officials said. But that was offset by strong results in the specialty foods area, including the company's newly acquired Mark-Lynn Foods, which packages single-serving condiments and dressings for the food service business. One analyst, Farha Aslam of Stephens Inc., lowered her rating on Hormel because of the surging supply of beef and poultry that will come to market later in the year. HORMEL FOODS First Qtr. ended Jan. 29 (in thousands, except per share)

2006 2005 Revenue $1,415,933 $1,271,431 Net Inc. $69,276 $64,633 Per Share $0.50 $0.46

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Copyright (c) 2006, Pioneer Press, St. Paul, Minn.

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Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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