Hormel Foods Earnings Call Nuggets: Refrigerated Foods and Hog Price Outlook
Hormel Foods Corporation (NYSE:HRL) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.
Akshay Jagdale – KeyBank Capital Markets: First question on Refrigerated Foods. Can you just give us a little bit more insights into the weakness? I mean, this quarter tends to be historically one where you can have some of your lower margins, but the cut-out itself wasn’t as weak as your results would imply. I think, you mentioned something about bacon. Can you just help us with what are components or maybe your cost basket went up so that we can keep track of it going forward and be aware of it what happens. So, just trying to understand what happened because it definitely surprised us and it seems to be unique relative to some of your peers.
Jeffrey M. Ettinger – Chairman, President and CEO: I mean, the weakness for Refrigerated Food was clearly the most pronounced in the earlier part of the quarter, ending up prompting us to come out with our guidance adjustment that occurred mid-quarter. At that stage, we were seeing some continued weakness in processing margins, but the bigger culprit had been the spike in some of the raw material costs, particularly bellies for bacon and trim costs for a number of our products; pepperoni and other items within the portfolio. Now, as the quarter went on, the team had an opportunity to – particularly on the bacon side, priced against with a new reality of what the cost situation is. Belly costs are still at historically very high levels, but they have moderated some from the peak, and we expect now as they kind of head out of the summer season, they should start to return to more normalized level. Overall, for Refrigerated, I mean, those are the big challenges. I mean, they wasn’t all bad for the quarter in terms of their – what we look at for their business performance. Our large foodservice group for Hormel is part of Refrigerated Foods and they really had a very fine quarter, growing sales at a solid rate and really doing a nice job introducing some other newer products, their FIRE BRAISED meats and their PECANWOOD. This half also does represent somewhat of an investment time for us with the REV brand. We’re very pleased with where we’re at with that brand. We’ve achieved the distribution goals that we had set for the team. We have the ad campaign kicking in. Our early sales also are very promising. But anytime you roll out something new on that scale, we’re not going to be bringing bottom-line contributions for that brand to the team this year, and probably even in the next year somewhat. But we’re heading in a good direction with that.
Akshay Jagdale – KeyBank Capital Markets: Just on that point, Jeff, can you help us understand sort of where you are with REV, like ACV, number of SKUs, anything you can give us? And how do we parse out that positive from your results? The volumes are obviously down, so it’s hard to tell what impact REV has had even on the revenue side. So maybe you can help us– (indiscernible) channel checks also tell us some that – the launch at least initially has been pretty encouraging. So maybe you can just give us a little bit of a sense of; one, how it’s doing and just talk about the impact it’s having already…