Meat+Poultry - June 2019 - 14

BUSINESS NOTES

HORMEL FEELS ASF IMPACT
Market volatility caused by the
outbreak of African Swine Fever (ASF)
in China was a factor in Hormel Foods
Corp.'s Q2 financial results for fiscal
2019, announced May 23. ASF hindered
quarterly earnings despite record sales
in three of Hormel's four business
segments.
"African Swine Fever in China
started to impact global hog and pork
markets this quarter, which led to
rapidly increasing input costs," said
James P. Snee, president and CEO. "In
response, we have announced pricing
action across our branded value-added
portfolio in the Grocery Products,
Refrigerated Foods and International
segments."
Adding to the pressure were
start-up issues at the company's turkey
processing plant in Melrose, Minnesota.
"Jennie-O Turkey Store profits declined
due to a combination of plant start-up
costs and lower retail sales," Snee
said. "We made a large investment to
automate our whole-bird facility in
Melrose, Minnesota, and the start-up
was more difficult than anticipated.
We made excellent progress through
the quarter and are now on track to
deliver the production efficiencies we
expected. Retail sales declined for

MEAT+ POULTRY | 06.19 | www.meatpoultry.com

in the United States. In addition,
China is the largest pork producer and
consumer of pork in the world. Second,
due to the losses of hogs in China, we
have seen hog prices in China increase
by approximately 20 percent during
our second quarter. Prices will likely
continue to move higher as cold storage
stocks in China are drawn down."

BEYOND MEAT EXPANDS ITS
EUROPEAN PRODUCTION
Beyond Meat Inc. is expanding
production overseas through a
partnership with Zandbergen World's
Finest Meat, Zoeterwoude, The
Netherlands. A new manufacturing
facility in The Netherlands will produce
Beyond Meat plant-based burgers and
other products for European markets,
reducing the brand's transportation
footprint while accelerating distribution
across Europe. Beyond Meat began
partnering with Zandbergen last year
to distribute its products throughout
Europe across foodservice and retail.
"The consumer response in Europe
has been very positive, and we look
forward to being able to better serve
those customers with locally produced
products," said Seth Goldman,
executive chairman of Beyond Meat.
"We are pleased to have strong strategic
partners in Europe like Zandbergen to
help us grow our global footprint."
Globally, Beyond Meat products
are available through distributors in
Australia, Chile, the European Union,
Hong Kong, Ireland, Israel, the Middle
East, New Zealand, South Korea,
Taiwan and the United Kingdom.
"As the demand for plant-based
products continues to expand in
Europe, we are thrilled to be partnering
with Beyond Meat to produce their
innovative products outside the US,"
said Adriaan Figee, chief commercial
officer of Zandbergen World's
Finest Meat.

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Hormel Foods

14

the quarter, but we are reactivating
promotional activity and advertising in
order to regain distribution."
Management initially had forecast
full-year sales to be in the range of $9.7
billion and $10.2 billion. Earnings per
share were forecast to be in a range
between $1.77 and $1.91 per share.
Following the second quarter, Hormel's
guidance was revised lower to sales
coming in between $9.5 billion and $10
billion, and earnings being in the range
of $1.71 to $1.85 per share.
"We started to see the market
effects of ASF in our second quarter,"
Snee said. "We saw a rapid increase
in key input cost for hogs, the USDA
composite cutout, bellies and trim
during the quarter. We expect all these
markets to increase in the coming
months. In response to these input
cost increases and the cost increases
we expect to come, we announced
pricing action on the majority of our
pork-related products portfolio across
refrigerated foods, Grocery Products
and International."
For the quarter ended April 28,
Hormel's net income was $282,429,000,
equal to $0.53 per share on the common
stock, and an improvement over the
same period of the previous year when
the company earned $237,384,000, equal
to $0.45 per share.
Sales for the quarter rose slightly to
$2,344,744,000 from $2,330,568,000.
The trade war with China
impacted fresh pork exports and the
performance of Hormel's International
business unit. Sales declined 9 percent
to $146,285,000, and segment profit
fell 31 percent to $14,325,000 during
the quarter.
Looking ahead, Snee said he
expected ASF to continue to impact
the market. "As we look forward,
the biggest unknown in the protein
industry is related to the outbreak of
African Swine Fever in China," he said.
"The best industry information shows
that China has lost between 150 million
and 200 million hogs. This is equivalent
to more than the entire pork production
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Meat+Poultry - June 2019

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