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Acquisitions help McCormick achieve record full-year results

January 25, 2018
Food & Drink

McCormick has seen its sales increase by 10% in its strongest ever full-year results as the company benefited from its acquisitions of Giotti and Reckitt Benckiser’s food division.

In the 12 months to 30 November 2017, operating income rose by 9.5% from $641 million to $702 million. The increase was said to be driven by the company’s shift in portfolio to more value-added products.

McCormick bought RB’s food assets in a $4.2 billion deal last July and it sealed a deal to acquire all of the shares in Italian flavour manufacturer Enrico Giotti for approximately €120 million in late 2016. These two deals contributed 6% to McCormick’s sales increase in 2017.

The remaining increase was driven by new products and growth in the base business through brand marketing support, expanded distribution, and pricing actions taken to offset material cost inflation.

Meanwhile, in its fourth-quarter figures, sales were up by 20% on the previous year with all its global units posting positive results.

In the Americas, sales rose 25% in the fourth quarter, achieved through its portfolio of McCormick and Lawry’s spices and seasonings, McCormick recipe mixes and breakfast products, and Gourmet Garden products.

Speaking of the figures, McCormick CEO Lawrence E Kurzius said: “Our broad global flavour portfolio continues to drive growth and differentiate McCormick. In 2017, we delivered another year of record financial results with strong core business performance and the incremental impact of acquisitions. Our performance reflects the effectiveness of our strategies and engagement of employees around the world.

“We delivered growth in sales, operating income, and earnings per share in 2017. We exceeded each of our key financial targets in 2017. Our sales growth and focus on profit realisation drove excellent financial results across both our consumer and industrial segments. In addition to our strong base business and new product growth, the acquisitions of RB Foods, Giotti and Gourmet Garden contributed to higher sales as valuable additions to our global portfolio of flavors.

He added: “2017 was a milestone year for McCormick. We are proud of our performance and our continued growth trajectory heading into 2018. With new ideas, innovation and purpose, we are proactively adapting to changes in the industry. We are continuing to capitalise on the global and growing consumer interest in healthy, flavourful eating, the source and quality of ingredients, and sustainable and socially responsible practices.

“Our performance across our broad global portfolio is strong and we strengthened our flavour leadership further with the addition of the iconic French’s and Frank’s RedHot brands. Our enthusiasm for the acquisition of these brands and our confidence that it will drive significant shareholder value only strengthened in the fourth quarter. We are well positioned to capitalise on the opportunities for growth and cost savings.”

In its 2018 financial outlook, McCormick said it expects continued global growth in consumer demand for healthy eating and that it is well positioned to meet this demand through its flavour portfolio.

This year the company expects to grow sales between 12% and 14% compared to 2017 through the incremental impact of acquisitions completed in 2017, new products, brand marketing and expanded distribution.

The company has plans to achieve at least $100 million of cost savings and intends to use these savings to improve margins, fund an increase in brand marketing, and as a further offset to increased material costs.

Source: FoodBev

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