McCormick & Company Earnings Call Nuggets: Europe vs. N. America, Consumer Takeaway Basis Trends
On Thursday, McCormick & Company, Inc. (NYSE:MKC) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Europe vs. N. America
Chuck Cerankosky – Northcoast Research: Looking at the QSR business in Europe versus North America, one is weak or one is stronger, yet the economies the book have fair amount of consumers stress. Can you give us some insight on that difference?
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Alan D. Wilson – Chairman, President and CEO: I think part of what’s going on there is that we’ve gained a little bit of share in the European business. Our share is relatively flat in U.S. business, so I think I would necessarily – and I’d say the same thing about Asia that I would necessarily draw an influence into the performance of that channel based on our results because there is a lot of things that move back and forth based on what items we supply and what the customers are promoting and what share we have gained.
Chuck Cerankosky – Northcoast Research: Then looking at the underlying tax rate Gordon you’re comparing it $0.04 favorable variance to the underlying tax rate is that suggesting something in the low 30s?
Gordon M. Stetz – EVP and CFO: As we indicated for Q4, we expected actually to be below 30%, in the range of 27%. Are you saying – you’re asking about the underlying tax rate I apologize. The underlying tax rate would be about 30%.
Consumer Takeaway Basis Trends
Alexia Howard – Sanford Bernstein Research: Can I ask about some trends that we’ve been seeing in the consumer takeaway basis, it looks as though in spite of the seasonings in the U.S. there’s been a bit of encroachment from private label dollar and volume share. Could you just tell us a little bit about what’s going on there with respect to price gap to private label, private label promotional activity and do you expect that kind of an environment to persist going forward?
Alan D. Wilson – Chairman, President and CEO: I think it’s going to be a challenging environment going forward, but as we look at it, the four week data is pretty skewed because it can be based on what we’re promoting and when we’re promoting it and certainly what you’re talking talk about is a factor in the four week period, as I look at it over the year, we’ve actually seen a more aggressive price change with private-label than we have necessarily with the brand and actually we’ve grown share over the 52-weeks all channels, all outlets with McCormick brands versus private label. The price gaps had closed pretty significantly what we saw in the four week was probably some promotional activity, suggest about 3% price impact from private-label and about 5% from the brand.
Alexia Howard – Sanford Bernstein Research: Just a quick follow-up, the industrial business is Asia Pacific, you mentioned adverse promotional activity. Again do you think that’s likely to persist or was it really just affecting this quarter?
Alan D. Wilson – Chairman, President and CEO: I think we’ll still see some impact of that and what it is is that customers are focused on promoting some items that we don’t supply. So that is certainly a piece of it. It’s not necessarily a drop in their promotional activity, it also take you back to we had very, very strong results in the fourth quarter of 2011 in that business we were up 16% in volume. So I think it’s a little bit of their focus on some other stuff and we’re up against a fairly tough comparison and the pipeline of some new products that were launched in the fourth quarter last year.
A Closer Look: McCormick Earnings Cheat Sheet>>