McCormick and Co FY 2Q15 Earnings Call Notes

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Adjust operating income in constant currency…

“Special charges along with currency lowered our operating income results. However we grew adjusted operating income in constant currency by 7%. This is an improvement from the first quarter when adjusted operating income in constant currency rose 1%.”

Economic conditions challenging in EMEA but had strong volume in France, Poland and Russia

“In Europe, Middle East and Africa, EMEA, economic and retail conditions remained challenging in parts of the region. However in constant currency we had strong volume driven sales growth this period particularly in France, Poland and Russia.”

Americans are cooking

“Let’s turn to the Americas. In this region we’re making further progress improving performance of our US consumer business. Consumer interest in flavor, supple and healthy ingredients and cooking with fresh products continues to drive strong category growth for spice and seasonings as seen in the latest consumption data with category sales up 5% in the quarter.”

More snacking in the US

“In the Americas region we are benefiting from an increase in consumer snacking, developing seasonings for snack bars, crackers and chips and similar products. At the same time our customers are moving toward more simple ingredients and our foundation in spices and herbs has us well-positioned.”

Further recovery in China

“In our Asia-Pacific region we are pleased to be seeing further recovery in base sales to quick service restaurants. As in the first quarter we had an added benefit of innovation and limited time offers and with export sales of product supplied by our facilities in China, our outlook is for continued improvement through the second half of 2015 for our industrial business in China”

Analyst comment: Seeing a shift towards e-commerce in China

“The shift to e-commerce in China, it’s hurt a lot of consumer companies lately. McCormick seems to be bucking the trend. Just curious the spice and seasoning category, is it not being hit by the channel shift as much as others or is McCormick benefiting from that channel shift? I’m just curious for your thoughts here because it does seem to be a little bit of an anomaly versus what we’re seeing elsewhere.”

We do participate in e-commerce in China but we’re less dependent than many peers

“We do participate in the e-commerce sector in China but I’ll tell you for us it’s still developing segment of the market, or developing channel just like it is for everyone else. The big difference I think in our business in China for our consumer segment is that we’re a lot less dependent on the modern trade than many of our peer companies.”

We are still seeing a bifurcated consumer in the US

” We are still seeing a bifurcated consumer with some level of growth in premium and our gourmet brand is an example of that and niche categories. So there is some growth. We are seeing some recovery in food service with people eating out. So we are seeing some of those lower gas prices find their way in. On the other hand, there is a vast number of consumers who are still stressed economically and so we are competing in the value segment to try capture that.”

We’ve seen some slowing in China

“In China, as Lawrence said, there has been some slowdown in economic activity. We’re encouraged because we’re still – we’re pretty broad-based, we’re in the traditional trade, we have our presence in the modern trade and we’re participating in the emerging and fast-growing e-commerce. But we’re still long-term believers in China. We continue to make investments there and are bullish on our prospects.”