(Rewrites first sentence, adds CEO and analyst comment, updates share price).
CHICAGO, May 22 (Reuters) - U.S. meat company Hormel Foods Corp HRL.N reported a 14 percent rise in quarterly profit on Thursday, boosted by the popularity of its refrigerated foods and better sales of its Spam lunch meat, Hormel chili and Dinty Moore stew.
While the results beat the average forecast by a penny, shares were lower as the company warned of slower profit growth the remainder of the fiscal year amid higher feed and fuel costs. It left its fiscal-year earnings forecast unchanged at $2.30 to $2.40 per share.
The Austin, Minnesota-company said profit was $77.56 million, or 56 cents a share, in the fiscal second quarter that ended April 27, compared with $68 million, or 49 cents a share, a year earlier.
Analysts’ average earnings forecast was 55 cents a share, according to Reuters Estimates.
“It was a solid quarter for Hormel Foods,” Jeffrey Ettinger, chairman and chief executive officer, said in a statement. “We were able to meet our objectives for sales and earnings growth in the second quarter.”
Sales rose 6 percent to $1.59 billion.
“We should still be able to grow our business, but we don’t think it is going to be at the rate we have been delivering in the first half,” Ettinger told Wall Street analysts during an conference call about the earnings.
Like most food companies, Hormel has raised prices to offset rising costs. It has also used new products such as Spam Singles -- a single serving of the meat product in a convenient package -- and Hormel chili microwaveable meals to help improve margins.
“Our first look reveals that refrigerated foods benefited more than we expected from lower hog costs, while turkey suffered worse than we expected from not being able to recover $39 million of incremental grain costs,” Jonathan Feeney, a food analyst for Wachovia, said in a research note.
Operating profit in Refrigerated Foods, Hormel’s largest unit, jumped nearly 26 percent to $55.63 million, due to lower hog costs, compared with a year ago. Also, it had higher sales of Hormel Natural Choice deli meats and refrigerated entrees.
“We have been able to offset some lost volumes in the casual dining segment by pursuing other channels,” Ettinger said in a note.
The Jennie-O Turkey Store unit posted earnings of $11.71 million, down from $13.95 million a year earlier, due in part to a $39 million increase in feed costs.
Prices for feed, particularly corn and soybean meal, have increased sharply this year due to strong demand by livestock producers and exporters. Also, more corn is being used to make the biofuel ethanol.
During the conference call, Ettinger said the turkey unit may post even worse results later this year.
In response to “market dynamics,” the company said it would reduce turkey production about 5 percent.
The Grocery Products segment posted a 6 percent increase in operating profit, partly due to increased sales of Hormel Compleats microwave meals, Hormel chili and Dinty Moore stew.
Hormel shares fell about $1.44, or 3.5 percent, to $39.54 in midday New York Stock Exchange trading. (Additional reporting by Brad Dorfman, editing by Maureen Bavdek)
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