- The Washington Times - Monday, January 28, 2002

Even during a recession, Americans want tasty food.
Shares of McCormick and Company Inc., the world's largest spice manufacturer, held strong last week after the company announced record sales and earnings per share in 2001. Shares closed at $42.73 on the New York Stock Exchange Friday. Company shares have risen 20 percent in the past year.
The Sparks, Md., company announced that sales for the year ending on Nov. 30, 2001, were $2.4 billion, a 12 percent increase over the previous year. Earnings per share for 2001 were $2.09, McCormick said.
"We are particularly please with this performance, given today's more difficult environment," says Robert J. Lawless, chairman, president and CEO of McCormick, in a release announcing the earnings.
McCormick is best known for basic spices sold in grocery stores, but analysts say they have increased their financial strength by introducing "quick scratch" meals and other similar food products. The company also provides seasoning for KFC's popular chicken and Burger King sandwiches. McCormick's sales to restauants actually grew 8 percent in 2001, despite a precipitous decline in restaurant patronage after September 11. Sales to snacking companies grew 12 percent in 2001.
But despite this success, McCormick says it is in the middle of cutting costs due to a decline in packaging sales. The company cut 135 jobs in the fourth quarter, as part of a wider cost-cutting effort that will close some distribution centers in the United States and factories in Canada. The total cost of the restructuring plan will cost 275 jobs and $25.6 million after taxes, the company says.
Analysts see the cuts as a proactive move, given the company's relative financial strength.
"Good managers anticipate the direction of the business and pressures in the business," says Mitch Pinheiro, an analyst with Janney Montgomery Scott in Philadelphia.
McCormick's sales remained strong throughout 2001 because of its presence in several different sectors, including fast-food restaurants and scratch cooking, analysts say. The acquisition in 2001 of Ducros, a French spice company, is expected to improve the company's margins.
"I think their earnings performance over the last several years is the reflection of having a well-balanced and global portfolio," says Mr. Pinheiro, who rates McCormick's stock "accumulate."
Merrill Lynch analyst Leonard Teitelbaum rates the stock a "buy" and says in a research report that McCormick "has one of the best earnings track records in the food industry." He also applauds McCormick's decision to maintain its current advertising budget, because ad rates are falling and the result could mean more advertising for the company's brands.
The big test for the company may come later this year, when it implements a selective 5 percent price increase for its U.S. consumer business.
"McCormick's past price increases have been well-executed," Mr. Teitelbaum wrote. "The 2 percent price increase the company instituted in 2001 had no impact on volume and did not disrupt customer buying patterns."

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