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McCormick’s Consumer Segment Fed Fiscal Q4 Performance

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Consumer business segment

McCormick & Company (MKC) operates through two segments: Consumer Business and Industrial Business. The Consumer Business segment contributed 65% to the company’s total net sales in fiscal 4Q15, reporting $784.6 million in revenue. The segment’s revenue grew 1% from fiscal 4Q14.

Consumer sales in the United States rose 1%. A higher volume and product mix increased US sales of spices and seasonings, including Grill Mates and Lawry’s products, gourmet items, and Hispanic products. Also contributing to the growth in the quarter were sales from Stubb’s, which McCormick acquired toward the end of fiscal 3Q15.

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McCormick is also having success in Europe, the Middle East, and Asia, where consumer sales rose 5%. The increase was 18% in constant-currency terms. An 11% sales increase from the acquisition of Drogheria & Alimentari in mid-2015 drove the overall increase in the area. New distribution in Poland along with new products and brand marketing in France added 7% to volume and product mix growth.

Consumer sales in the fourth quarter for Asia-Pacific fell 6%. The segment’s operating profit, excluding special charges, fell to $169 million compared to $172 million in fiscal 4Q14.

Industrial Business segment

This segment recorded a 4% rise in sales in fiscal 4Q14. Sales grew 11% in constant-currency terms. Higher volume, higher product mix, an acquisition, and price changes in response to higher material costs contributed to the rise.

Industrial sales in the Americas rose 6% or 10% in constant-currency terms. This increase included a 5% positive impact from higher volume and product mix. Higher US sales of branded food service products and customized flavor solutions, plus increased sales in Mexico, contributed to the increase.

Industrial sales in Asia-Pacific were flat compared to 4Q14. The Industrial Business segment’s operating income, excluding special charges, was $46 million compared to the $30 million recorded in 4Q14.

The segment’s operating profit rose strongly, by 62%, from 4Q14 in constant-currency terms. This increase benefited from higher sales growth and cost savings that offset material costs and employee benefit expenses.

Peer performance

McCormick’s main competitors in the industry include General Mills (GIS), Pinnacle Foods (PF), and Cal-Maine Foods (CALM). They reported operating margins of 20.4%, 15.6%, and 30.4%, respectively, for their last reported quarters. The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) and the PowerShares S&P 500 High-Quality Portfolio (SPHQ) invest 2.5% and 1.3% of their holdings, respectively, in MKC.

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