Hormel Foods (HRL) 20 Nov 182018 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Hormel Foods Fourth Quarter 2018 Earnings Release Conference Call. At this time, all participants are in a listen-only mode.

As a reminder, this conference is being recorded on Tuesday, November 20, 2018. I would like to turn the conference over to Nathan Annis, Director of Investor Relations. Mr. ahead, go Please Annis.

Eastern. to of Foods our fiscal the X:XX morning Welcome the results call fourth before AM around opened quarter XXXX. market the morning. conference Hormel for this Good We released

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our as Flank cash the Braised salsa, many and to Steak earnings items guacamole record dividend. snacks, paying year space We flows. such quarterly the sales, customers. Natural consecutive also financial of represented On delivered marketplace, and for innovative XXXX products items Naturals service new food a the Fire Applegate delivered XXth Choice perspective, retail in we Herdez also

deli impressive XXXX XXXX, Refrigerated value-added the was the retail, significant dividend our announce allowed from made for a coming digit foods confidence Our many strong which increase contributions in food XXth our to growth brands financial our increases. performance service. results XXrd success. consecutive consecutive By of mark will and double year in business to with dividend in us measures, and

business CytoSport meet the manage a the Turkey of our industry. through areas to oversupply drink had disappointing and expectations. And they difficult not in did store Turkey year lines. had continued in product However, Jennie-O there ready serve as year another that are declines single powder with

appropriate to growth return both taking in XXXX. businesses and actions expect are We a in

quarter, parts Looking product $X.XX, business. foods at across in commodity delivered This headwinds record effort impressive the segments in was adjusted share led the four deliver by all refrigerated fourth we Many increase. to significant overcame per and of brands XX% their earnings growth. results a all and success of lines drove

also growth team in of the international branded led delivered products. exports strong by quarter, Our

and to Turkey sales Meats, declined Hormel contributed by foods volume such volume. even Applegate, refrigerated and For to X%. Organic meats an branded also such pepperoni, Refrigerated the and sales foods. organic decline and and to market. quarter. freight and to Hormel declined The of as joint how craft the and of towards excellent exports of due drove volume pork the A X% driven Columbus reduction to peanut the Natural delivered profits organic X% as Braised deliver and X% contributed on proud sales of basis, venture growth freight lower increase X% met X% Fontanini, weakness to Skippy and manufacturing in total improved acquisitions. of food value-added in The and foods company, We addition Ceratti increased increased sales X% shift primarily portfolio sales increased volume Choice was International Hormel particularly year lunch a Fontanini in SPAM XX% and was due sales growth offset Columbus The due International profits team on in The On increase. the X%. X% XX%. segment increased drove MegaMex pork sales increased expectations volume profit continues increase decline bird due increases of Products, and able whole costs. in in growth Natural saw exports meats, Refrigerated quarter. our the strong X%. business of team X% meat store on am organic to this for our Lower an declined for sales contract all fresh Sales Ceratti declined decline hog I harvest the earnings. products. and branded volume commodity was acquisitions able products, increase Brazil to lower products of also the Fire expenses market. as lower and branded costs commodity of higher butter. products spite Pricing sales refrigerated decline. the volume investments. SG&A higher X%, in and Jennie-O also sales to advertising grew

decreased shifted prices, to whole our broader chain. reducing This on and minimize lower cold in Grocery out sales I food business. made growth Wholly freight at Segment that bird third and a profit This Guacamole segment our expenses. this Investor lower becoming showed quarter not last our As profit manufacturing ground service, feed costs. to modernizing supply global Day. volatility, and XX% the laid assets growth our expanding Sales company, contract on and we increased strong due X% accelerating dips our on of mentioned were our included premium higher call, whole and higher more food sales Jennie-O freight becoming sales and path excellent did storage a company, lean declines portion items of non-strategic deli of sales Herdez sales declined quarter. we a and Adjusted decreased X% progress products salsa to divesting bird volume XXXX forward offset as expenses. Turkey year,

this input our of lower will business to a industry. a factors pork return anticipate continue fundamentals to execute combination the in and these external will costs initiatives We hand, one to against year. from normalized impact in we more expect XXXX. I On Turkey benefit

in hand, On commodity volatility. other continued addition market inflationary the we to expect pressure

the controllable better are us focus marketplace was XXXX. it manage the Our business these on elements to which through The help innovation at the quality will bringing be even in team's we and of than ability challenges. speed will to

Our Bacon last from pipeline achieve five wraps XX% fully this XXXX, made XXXX also businesses challenge. solutions of division, salsa. innovative deli toward products us refrigerated in came will we of XXXX is as In guacamole products expect brands taps our which innovative progress goal continued Fire deli group X sales XXXX more Hormel Choice, growth such products of combines XX% all as Herdez innovative of years. and new bacon, innovation into We from Natural and than in beginning our cooked within start fiscal Braised of the snacks, official our our the by The Meats, one and aspects help foods.

sales February, deli prepared and As offerings this a high of at marketed through sold an in organization. quality and CAGNY we array new unmatched delivers outlined foods direct division

deli We the are help create excited the of to retailers future.

growth. The showing with in placements storage XXXX, business industry for segments and units show four Turkey to sales in profit expect at slow Looking all and the stocks. are the improvement declines cold we fundamentals

seeing we the For within first are the industry. signs years, in of time over two consolidation

While are this by encouraged to take growth continue these factors, to of proactive business. we the steps restore we

sales expectation expect and and products investments to costs, Gains Wholly established growth we in pork addition expected offset as again to branded in the earnings from to Jennie-O Growth food our a in in turkey in Herdez. We Brazil Commitments Applegate. refrigerated commodity by will to exports. in value-added a declines be are and and year fresh offset strong Our of see optimize Turkey such this businesses brand brands products and grocery for Jennie-O such modest industry year. brands continued International chain expected will is the value-added recovery in a coming control store. in will Skippy supply the service, led growth as from Similar in branded have important XXXX. profits in increase our spam deli an and profits. in Justin's, is once in Exports and and be XXXX, Guacamole teams reduction emerging China earnings and gains to sales food.

the a brand. meaningful expect also We contribution Muscle from Milk

our projects, about years with chain supply were at team was automation higher differently million to corporate of and manufacturing our These capture and optimize the the our able speak capture and best. in-sourcing manufacturing $XX teams dealing accountability. one teams all better through into savings managing we in of many and the asset more freight been for procurement, able beginning thinking structure results chain grassroots incremental on in reorganizing to plants utilization as personal a culture known ways complex of have of logistics. Fremont to internally our and to Since costs. In over best our through is supply XXXX, the production, XXXX, savings while sale facility, focus Our

$XX XXXX, spectrum into our $X.XX agreeable in increasing customers necessary, into earnings on all finding brands key and factors guidance our target factor mutually to per savings $X.XX Taking share of our of Areas prices. is expect remain these our XXXX, we are cover to use with account, savings and chain. setting increase inflation, to if at closely is contribute our We solutions One full-year supply and to opportunity guidance We reflects we freight. reinvest guidance million. segment earnings of $X.X to pretax another our units, the cost This watch plan growth. the across offset international at For driven growth entire large We we by service, billion. to XXXX. all increase and and retail, $XX.X and deli business focused sales food continuing billion a saw in macro performance. profit are help double-digit strong

to tax a Sheehan will discuss benefit turn for relating due At to tax I XXXX. financial As quarter key had the information to XXXX we reform. and a significant time, our call to fiscal assumptions over this reminder, Jim the in

morning, Fiscal and everyone. a earnings XXXX cash share, for year record and sales flow Good was Jim. operating you, dividend. Thank per

is aligned was strong for our allocation a pounds, is billion vision compared term strategy. strategy balance decisions for long and with growth sheet X% XXXX. the fourth to Company. quarter financial Volume decrease support Our capital the the X.X The

quarter, a recorded million, grew last billion, recognized the were earnings of for to volume Full-year was For fourth full we increase. grocery were associated up non-cash XX% quarter, XX% were $X.X for also year, were segment. with CytoSport the earnings earnings a the $X.XX per the share impairment compared the X% $X.XX, a impairment million increase. increase. a quarter XXXX the product sales year X% were XX% or Sales Adjusted full X%. share $X increase. the for in billion, $XX $X.X business. In per The $XXX Net year. billion, fourth In

of the the efficiencies acquisitions was advertising throughout on X.X% last of increase. to In SG&A of impact the as decline year. to compared sales For a sales year, organization. full the excluding percentage to we funding expect company The SG&A X.X% continues drove as focus XXXX,

$XXX to last For million $XXX year. million year, advertising was compared the

We XXXX, continue to employee-related to shift corporate universal Hormel pepperoni, option and such to we including use Hormel for trade advertising as in Choice, brands to increased Natural Columbus the due attain all support plan primarily In advertising and investments SPAM, between stock to General the return. employees. highest expenses Jennie-O. expenses, grant higher XXXX,

basis For all in the XX.X%, were to full at Jennie-O points bird and declines segments year lower whole than XXX Higher operating freight margins decrease. XXXX. the contributed

projects for expenditures be for at expenditures The a year Dold operations were XX.X% from billion bird last dividends. use of acquisition Major $X.X rate to the cash of cash flow of anticipate dividend XXth whole improve including XXXX. between In to operating annual per effective in Columbus and XX.X% December in in year. value-added effective an primary The rate plants. $X.XX tax Act rate XXXX. the We due full consecutive Cuts is was of investments expanded highly Tax capacity million the compared CapEx, XXXX, and $XXX facility. value-added XX.X% to XXXX XXXX. share. $XXX capital we include billion margins improve expected efficiencies Jobs XXXst November to to We tax of and $X expansion automation year expansion be our expect in decline quarterly the compared million, of was effective paid passed The was to Capital our We and automated and XXXX. The to at XX%. the capacity, generated

the million increase. year dividend have remaining the $XXX rate. increased strong repurchases debt consistent dividend total remain totaled double-digit with Share year capital $XX XXrd the and dividend year our debt with consecutive X.X level was year we million position the low double-digit representing given the the Columbus to full acquisition consecutive XXth fund in in a We flow. the increased We fourth short-term the have for ending announced needs debt. and cash at a quarter, we repaid million, also We the the associated This in of other financial shares.

stock based continue to solution from will on option We exercise repurchase valuation. offset factor our internal and

to industry. demand continue in and supply hog We the monitor

new production. hog is supply the We prices the the progress next to dependent of Near-term plants increase on full market. due heavily an up pork of abundant expect year. have volatility Domestic to on ramping supplies declined to protein

prices this continue businesses. XXXX. into value-added benefit to protein expect our We Lower

to exports in to We expect X% X% be up XXXX.

in China impact and lower the However, the fourth exports. well Product below costs African for U.S. swine quarter pork fever average. lower. five-year outbreak were generally could were Input prices XX% year than the last

to values increases slight next prices USDA expect year. We X%. hog declined composite

industry composite exposure USDA We the prices. USDA is hog approximately will sale hard purchasing on expect purchases we reducing XXXX, XX%, the year. continued XX% margins. composite finishing deli below the is lower prices below XX% we and be reduced all Included In value. five-year guidance final, Overall, in due lower hogs our our commodity decline expect markets hog in be and decline trim Deli the our value prices average. purchases modestly the from of XXXX. lower the a When volatility XX%, level were in facility to profits XXXX. is the will Fremont volatility harvest pork in last from to based declined

expect first trim to in beef higher. be especially half. X% XXXX, We XX% lower was the trim in markets

XXXX. to higher Feed by prices trim year, meal. driven soya to costs beef be next compared expect flat We were

XXXX recovery in improvements shows XX% be than the remains placements but both key turkey prices, to expect five-year is higher storage six X% over The average. We in breast the Whole commodity lower Despite XX% XXXX last data prices. meat were impacted prices be XX% volume. despite down results through meat in feed breast lows year whole pressured year. prices will drivers, Turkey pull low. of higher cold higher months, costs XXXX. including last persist by Industry bird prices were meat next multiyear Breast Whole bird higher. birds Thanksgiving this than year. will Jennie-O below calendar

higher breast meat XXXX. We in expect prices

created foods. division As new we a within deli refrigerated Jim discussed,

sales refrigerated results with As close including in WholeStone with refrigerated from The sales in foods segment is Jennie-O size profits, XXXX, business from chain restate beginning foods. sale margins The allocation to in Actual be is in the refrigerated we Company food profits, will and in deli of plan moving deli Jennie-O deli an line $XXX report of Jennie-O of segment. of a segment. December. to scheduled within first months approximately the to beginning transferred three will result, million Jennie-O the quarter the Farms the will the to XXXX. results The supply

value-added facility first market We various expenses. equipment the will through the out manage pension quarter build volatility. the approximately and ability in In team related of million an to XXXX, demonstrated expenses incur various to $XX and factors of

strategy I'll We value over and delivering of from to our the long plan are the turn in the At XXXX call shareholders. to for call. term portion confident question-and-answer time, for this the operator the

go [Operator from take with our Michael Piper Lavery Jaffray. Instructions] ahead. Please first question And we'll

Can or the bit but down you that You've about little should seem like think savings? clarify talked the that a it road something million, about more think that? savings. type what's to doesn’t right Is way XX the restructuring it about chain we how likely any should includes supply bigger

thing the we it way about and we making indentify that to and the process, strategically saying started-off and get had best savings. the the Michael structure think could the that to reinvest think validate the right I is capture, we year was

look is XXXX keen the labor, logistics. on focus to and differently certainly we overhead, And supply. thinking team as manufacturing So optimize procurement

the and Fremont let's of forget put divestiture. freight in we them fact the course, that not increases the Of middle the

the thing. XXXX more the starting they're But bigger they towards we'll structural and you things. some to also will I tell going that of So on. have have pivot lot a

be that example the baseline for has we as most that probably network the would possible. of freight making over the shifted have long-term is So an sure optimize

like center, that travel how distribution do we the a so long-term. for And over miles what does look fewer

yes the now, short-term combination and we and right getting those a long-term So, it structural are is more But of to issues. of some things. bigger

your as the these have or visibility get down further of best and year could do of good those amount you projects And 'XX, you later pretty into upside the number for be in that a will road? have some

is know Those closer. get will we we'll realistic the us what that we and more I a little know road. be thoughtful, so as further for and down mean disciplined

add, I we we're item synergies $XX that previously would is excludes Michael, other million The acquisitions. about in any that talking announced our have

And our question Moskow next Credit will ahead. Robert with Please take from Suisse. go

recovery of I was fourth the that Couple the you little a give Can us is being on the on -- got guidance in quarter for is lofty, sales as would things the price but secondly thought are expectations, pretty markets in about. got that And on you've guide particularly well? is the that numbers especially curious commodity be of hog said there? assumption to and in more you how would the price. 'XX, on guide, composite What you light prices get up, be color some expecting there? lower how then you And you order below that

we 'XX -- set we for we very XX in we in we up off GP was sales segments, really 'XX, looked because a really QX that think there business in grocery at across incremental have the the look weaker think about products have well the healthy. the did As QX and sales realistic. but baseline we've guidance we're of are fact coming that have we our didn’t the When some different as driver did

growth expect of growth. the to expect XXXX, single more value-added a digits same terms see. we into it’s that mid Refrigerated that foods, heading to the in business So we show lot

line anything we've low line achievable. And in single-digit. I there, expecting single which growth high not crazy mean is expectations the of We’re with and believe top got our digit international our increase really we JOTS. then historic very is on

give guide very do is other question. your sales the on on believe I'll you the and ask achievable, more realistic So and color little maybe

volatility makeup online. of based similar We the be we to are them the growth the Hog the in industry prices XXXX, expect coming the supply to hog now low capacity expect structural single-digits. right including and be on to low up the

online spread, trimmed prices, higher XXXX. the of including we the beef be the to coming hog the capacity supply, be that we expect Regarding because commodity in while lower and additional down available expect the will delis

negative and China's that any or that have And to issues, soon assumptions you put a Is herd might for what exports? or hog for American mean disease tell? too positive

soon business. plan, opportunity but Rob, It's able to tell I we're the limited fever and to in early the pricing exactly assumed really export to that radar a if potentially for risk really swine we'll is you everyone what but s it's to of like sure because said. do you, African of And some take risk believe It's rest pork we with it too business it is tell. this watching our a an it would tell. that risk China else's. in to China have market, the be But too We our I’m line in certainly

take we go JPMorgan. from question Thomas Please with will our ahead. Palmer And next

trend wanted some call that that I I or provide about set set margins the the overall commentary the to first was quarter hoping how provide across segments. queues up. here In quarter around the the on past, up? seeing first again just you’re different could EBIT and you and you ask

benefit the so year quarter. in a heavily the situation have comments fact then will will QX. very we so Sheehan's by we and business tell would to or year, I done couple haven’t that about Yes, expenses of we the little heard the closing and did you QX last of Fremont guide out unique that recovery skewed in tax Jim Last of just much credit you the things mega really we was you have we in we called JOTS would some for as QX. that impact the talked because have bit I were a to

a have early in year. headwind So as that obviously, we're to going the

that talk what just side, mentioned Is top of the you already the you're on terms Milk that maybe bottom? inflection? that you to And for meaningful contribution and year. follow-up Muscle in in And on business about can its both then seeing

So part and top is several Milk talked show year business of throughout the to about we've really growth components or the bottom growth the that And continues the would take business. Tetra that the different grown line business. from imply and Muscle again the home multi-pack has

seen will food You've and has as their category, in expand that continue ready in and sports be in been to more mass they to healthy that the space. drug business out nutrition XXXX. We've seen recovery joint

really driver channel the and is resources that there business, e-commerce building-up growth continues back that is just the saw supports have traditional online business that expect competency spent into time brick-and-mortar that pressure and and we half more we shift the that in business, we to area for in now of effort specialty would, and said XXXX. be business. had that the the we powder continue the under of year like the from So we digital and to The muscle

next we'll And Jagdale our from Akshay take ahead. Please go question with Jefferies.

from bit. pricing to in you the this cost been industry the tighten bit maybe what think as next But wanted us Turkey you specific you’ve quite you a when you which go little cost headwinds the long. belt ask the business. was some about issues and cycle, I'm you I there specific that sure issues also Can some gone dimensionalize through been through wise your has talk has commodity year. Obviously, grow Can -- mean a about helps -- you address going I there into down a company can division. out more. cycle, the little

in specific high-level? So is into of are company -- underperformance much and margins genuine we can how versus you where context put us turkey help turkey, industry the

think in the where the key is be. we need need what driver going in I is is better fundamentals really us to business that mean get we I to JOTS industry. the that

happening, so we're still of And we've pace. that but some disappointed the in seen

growth, looking that But just to continue modest we'll a the so And industry. into growth. in XXXX, that we outperform projecting know modest we're we are

avian And keen the about areas to much security really team are more initiative as so on and unique facilities on the without work in continues sure those cost-effective. companywide while with on the to avoid we and optimize them. they talked make Akshay, antibiotics to Clearly, a solutions term initiatives. for our Jim some And of consumers, so another we our We doing outbreak. that mentioned, can of to can the had freight make efficient in we’re that's the that raise mutually making continue business, have how progress working And we and not that’s focus as a anyone to network. agreeable the our in long side it they're impacted find still influenza

a trend. XXXX, we know, part invested reinvesting trend. continues year. be Turkey in is other is to as We The as we see on brands in it again that on the this business brand We'll be in the

so industry. industry, to in the things we done us to outperform put the position the a our to we've versus and to outperformance accelerate performance, our point continue we have And think be

state-of-the-art we’re new spring. new take plant very a that to in that Melrose item one excited I that Akshay, would a level. efficiencies add That’s really plant the our coming will online about is the

the as going business will, for that So time. industry has increase that Jim to the This said, a long is outperformance. allow to outperformed us

one way. was Rob And in on but different asking about, just a maybe follow-up what

so with happening is price. your exposure Looking it's segments, to prices tell what's hard to unique full your with commodity really that the through business meat

to it being cost you’re overall seeing can picked high wise and inflation what level at us up sense industry relates food as So pricing give up. freight has you

than we take in And so the we Or you feel now on characterize what's like where how all the more finding But success are companies you that taking months are ago? cycle? talking environment? pricing. your about would Are six

I than anybody think that. we’re different in else no

at factors. all these We’re of looking macro

situation. we African really it dynamic it's tariffs, swine basis. And continue whether freight, a It's So to a category-by-category at look on clearly fever, exports.

so and JOTS refrigerated foods market based, And are the more market. closer to

talking And about. And have driven less is are pricing pricing early impacted frequently. that 'XX, really by by at do don’t 'XX the only at and a categories will And that look category obviously just bit more basis. so move we're looking market macro you and we pricing. pricing GP took late we issues we

has in holistic We’re each of understand guess trade, would puts number and growth I never sure of make think obviously projected that taking that taking solid pricing also categories one other be. the will has we those really sure we to two look making view and us corresponding our roles. very so each position the revenue brands been the the fact have it initiatives, of leadership levers that elasticity. And to fact management our brands never I ever that we in But easy, in understands regards number are a

you you But forget. be I I million? one are -- last guidance that what's housekeeping the profit three the will result know gone a of the one, did XX, for terms contribution of just say of profits magnitude year? months that will still next deal. next assuming the as but are $XX costs roughly be it Is roughly mean, order the I And the in year P&L not in

plant the Fremont going would of a also the major discussed is on expect the be during that are -- from those margins plants, XX% script but that profits of We or in the this portion three year. on those down decrease that the the Fremont those sale commodity the and hogs to we spread year,

both. of So I it's think a combination

Group. go next Buckingham question with ahead. And Please Larson our we'll Eric from take Research

GAAP in this, which it's -- in excluding, guidance the How your GAAP. I'm happens QX, question just outlined, number. not assumption? Fremont December. are you will follow-up that to want of but Is come answer a the little of that's you if assuming the fair much sales the know on a make a I that those expenses expenses so to think I included -- in are sure or guidance probably

That's Eric. fair a assumption,

And then question, I follow-up in which the CytoSport second here to we the for quarter. impairment the is, charge on saw wanted

business. business little the I advertising still widely CytoSport competitive. needs powder a sales on is support the the think that Jim side bit of side need? But track? I a issue behind to putting the that of e-commerce Is for fair toward else of it? moving get But in what more and back only amount you're that about think you else talked what also a the Or to this it's fix still happen

infrastructure the of curve terms as of have sales were the shifted, digital the that out I was having we things, that called Eric, in those needed. behind One we

which we're has the advertising infrastructure that initiative we where different us to in be big place that now we feel advertising those and highly perspective, we're has effective. like appropriate slightly content so finding some And have sales team an From that messaging, position reallocated and of we for a in we into have a dollars need. the

the so think really bigger for those I were well-positioned to XXXX. that things of And done two we get we're and had

Sachs. with our Adam we'll Please ahead. Samuelson Goldman go next question And take from

first the guess I Jennie-O. question in

us $X year. above in about I terms pricing early new help meat think market couple down did I the pass of the of only margins potentially terms improvement. about improvement I you would down, flu? the shutting for direction being you mid-teens path placements fiscal in to talk profit like pulp 'XX. indicators think talked for still through back about calling pre-avian moving competitor guess modest a it to those getting mean of in Can modest the breast Can are the profit of here? business in And this some being look right

fundamentals in direction. It's I think are moving the you really right touched the on this.

the is biggest the issue think I disappointment there in the pace. really

actually down trend up was look a And the so even the though little it if last at for in placements, full bit. you was quarter October,

got we've to fundamentals with stay accelerate. those track see think I and So on them

meat positive. levels We level. still at again, coming historically pricing. in down but see a a regards see breast inventory certainly correct as that high as We to positive You're

to need we that accelerate. see So

outperform we we be will back accelerate. times, said but to accelerate industry continue in to fundamentals continue things to that the -- we normalized will behind to several the doing We as outperformance, us help levels, the see the scenes truly need really the more get we're and place to

volume some the or you you -- capacity the first point to us the through sooner mean about At and to foods, Columbus refrigerated grow the you happen a quarter. volumes in what put the organic quarter help on volume Fontanini's in I the were And new the just the that mean in. to hog my disconnect point in organic levels. be should that from after does the or side at then think did through in harvest. think is layering as first question need harvest organic glare I started down about attributed this X%, that growing just here And trying into actually lower hog second past trajectory volumes refrigerated over organically?

year XXXX that the business that will will it been investments that businesses driving XXXX sales support think made see and value volume, is and you a investment We board. see that the across be is see I will the where of year that growth. in the those connect. are intentional to terms really added you we've in very that earnings that We've

And ahead. go Theurer take with we will question our Barclays. from Benjamin next Please

up you've Now you a deli And on what and Jennie-O basically foods segment. going the nicely you sale mentioned the into to the associated had move profitability. question you're as Turkey within volume, the business well have the as refrigerated

of question for there share stage business a restructuring going business the would any consider segment bringing Are on it spin from that magnitude that first this the off reported you a question? the encourage to at some would And refrigerated you're us is if should basis and more costs get if consolidating to Now be business? my by size could we little just actually standalone it's the be together. food that you the whole that to aware what of of additional is and

any and business. we're business, don't other in the as to that beyond expecting XXXX deli we've have regards consolidated expenses this In we

done work bigger these together place. bringing For them us a scenes, work of was the integrating was the all there the took in and most behind of really XXXX that businesses issues lot of

really create makes achieving And to engine any said part so And business, thought retailers A, to being said able that the this billion is have to about operating is splitting organization linked the refrigerated it's your we've closely we doing as because focus In to ready to and really were and that, food. the going question, do opportunity. stand-up like $X it's future and there. to we sense exciting. now making still and of it fiscal tied growth and and go to deli it XXXX last sure and helping and the of our we've that really It regards have next them given into it what set-off is perfect capitalize into haven't really on

that the Jennie-O. $X that's from million comes So in billion what basically Correct? $XXX

Yes.

at doing, last brand, was the I driven. then mean sales strong is update you’ve little bit international of what how And doing, a on in part, pricing. aggressive the been Brazil prepared food on Could increasing competitive that their some has least being acquisition clearly, -- Ceratti seen major we've the the how give on seen business, side being you I've how Because doing? environment is relatively the competitors

wanted So there that environment? to get able were you exposure and to your from how benefit Thanks.

brand market. into a along acquisition premium successfully Ceratti that some In entry pricing consumers. brand around point of recognized there’re great Brazilian some pass expectations. we has a XXXX, there reminder the it's by well take So is Brazilian said, And to us down macro as the inflation but we've did as been a very the I think our we all pricing, value-added given issues really able met

authentic here in that being States quality resonates a it consumers. terms high of United so lot And in the of a mirrors what artisanal with premium brand we have

business so meeting to expectations. midst is make the adding capitalize capacity the to continuing growth on there. sure opportunities in innovating, we're that of are all down We're And

question Please And we'll our with next Mizuho. take ahead. Jeremy go from Scott

It refrigerated in to includes which decline foods I costs, is want quarter. reconciliation the $XX say you think this it million the in million, being million up year wanted include $XX last JOTS million profits but guidance just reclassified estimated next doesn't closing So let's on business just commodity food. includes in $XX refrigerate clarify being million the clarify, what $XX so to estimated of $XX into

So $XX million is the fiscal something in your guidance there's in million organic range operational in improvements implying XX? to of that $XX

in XXXX. to say think you've about that I we're that everything the fair in included for looking talked it's growth is

in available detail but think the be to that million them. the $XX going refrigerated that more another and those year I Jeremy, is our will give if you other there's in can it are any you need to the think in guess foods, be Nathan it's elements general really strong for specific corporate, reflected number. reflected But be talking certainly answers. about other I I you’re overall

make up is the to reclassification being or But refrigerate Jennie-O included sure isn’t year? guidance, in so just your would've next want

has now refrigerated -- shifted O business that So included is organization, in deli which is our Jennie foods. the into now

rebasing essentially are that. we refrigerated reflect So to foods

the post-Fremont you probably expand in And refrigerate. if could on pre-Fremont dynamic

be said no think down products I be you getting be contract commodity harvest you’re your there would hog volumes. but done, impact will on would

that through and hands that you're add contract because effectively you into within the you'll clarify profit or through, earn products and entirely of from locked words will products will turn the contract a into in that be you what percentage to other quantify be WholeStone So just under going can value passing be with that don’t their customer spread, passed green you then there but that a value-added, Could you're the tonnage that, you And be possible? will that you are buying and don’t necessary there? if capability you're there getting on equivalents?

So will take of all Fremont off coming we of line. meat the

meat products. Some go value-added of will our that into

fresh margins pork Some would be sold as We on sales. retain all pork. fresh

we’re So composite the meat at USDA carcass purchasing the value.

between provisions to either and So carcass and belongs market the the or Hormel. the value spread retail the sale the

is additional sell by we this refrigerated our the made as Fremont the taking the structure. the see foods it, So is that de-risk to move coming we is and harvest and business this online, XX% capacity we’re exactly down and why with

solid opportunities XXXX? And dividend decade. was at just maybe maybe you're be the we into rationale however, XX% how payout should hike payout into -- just for done curious your a doorstep? leaning what thinking recalibration, you've that interpreting the slight that as about in M&A in what lastly on trend acceleration the provided the does so given not off ratio But guidance, a past the And in then your entirely

the organization. but flows flows business, biggest decade, flows our our is what the strong with we obviously, done optimism sheet the strong that our over is think we've so the This cash consistent driver, balance the of in strong clearly strong remains and going forward. cash cash I the last business for have

beyond, any acquisition think we XXXX off a about we that strong think clearly levers dividend we we us. make strategic is the and one head appropriate for into and very, very are the position is but in allocation as to when of So capital

Heather question next with our take from we'll go Jones And ahead. Vertical Please Group.

in on benign than A your talking lower of not about freight, more on so companies outlook -- other you comments of are some in what commentary 'XX real honestly, but freight industry quick on the the the some your articulated.

could in if wondering was on I you what saw similar side. So you 'XX are you -- envisioning the freight to inflation

marketplace had we now I on think that lower there bit lines we've more than year be little a and in in pressure have working time work XXXX. We to that the a saw is to going there's it. believe but it's the fiscal certainly on, balance still spent time freight

it it's goes to longer-term chain and supply overstate in but team headwind really this the back right I our that want on I And what certainly us. working network solution XXXX. for a to is don’t optimization is again, it So guess

it 'XX, about And for shifting the that increase? found 'XX what as promotion comment help of you Could made thinking give I came more of other you year-on-year increase you're guys had think as about in it then on dollars XX% advertising, and so sense you far some into below -- you that types talked effective. in advertising us about us

XX% of end significantly XX%. methods come plan what was and we to would you And our advertising but we did the last highest spending trained the we that see our brand ROI it while between working all increase were was ahead dollars support. know, find that I've of of of in at an in always And double-digit So strong increase, was advertising amount. by first-quarter, neighborhood below the equal promotional good above year, as said the

dollars brands message that the terms it spend would, those does is here hit flow we So and that ebb we and number of real and in we do across we we're all pricing, we of how thought those time dynamically The time -- things. highest brand trade, advertising lot managing of a support lot revenue the around ROI, management, growth this dollars. a for spend of and

up some we've what we'll ended support what said increase with lot And going in to We'll good then where feel of a in dollars. we he have spending we're the talked brand consecutive fine Jim brands about We've and fourth SPAM we record their the XXXX. continue And off and comments, time to under brand, spending. year, So Turkey Sheehan's Choice, reinvestment be coming well know those they're will -- it's of Jennie-O in spent store to of advertising. just we Umbrella effort course a business. who Natural dollars and the our and brand respond a that and

the are like they're returns need feel our whether or investments us So trade. advertising that we giving

Credit Suisse. take with question will Moskow Robert we go from ahead. our Please And final

us Just things headwinds was in s what all. sense Frank, 'XX, just to inflation a fiscal all the of sense can of just the in dollar give couple get you a clear up. to

us that those margins off give of bacon a low get started quarter? do prices really belly I think did bellies, you in the belly, you bacon margin on were Were hedged Second strong And and pretty rising. quarter in the higher. like? because expect a going in just you what of to ease little first Maybe more the slope the quarter, curve look clarity on

will XXXX, going year have in do bellies. $X.XX to this and volatility belly markets seen We we $X.XX we was in as said, that volatility freight see not we have I think The on about hedge I'll talk on year. bacon. the that the margins still over bellies right bit they're little And Jim be lower the to let believe a now. a We

business pricing it is and the of into ROI ties was previous answer strong, bacon of very in terms my to Our trade. really biggest terms in where or

But year, the that. through pleased top line I we’re navigate that bottom performance we the with quarter, so very both line. and bacon And for for you tell would

expense corporate million year. it like $XX question, Last this was

we it as be that. in catch high before. twice fiscal didn’t the 'XX? expect year to Should I similar think I it's as

will the the corporate put sale corporate in it million the won't expenses. have that pressure -- from Well, $XX increasing we'll so the expenses, closing on be Fremont of

the in Jim. So then, something mid-XXs

them don’t we that No, high. see

time. And call over there this or closing would to like are back phone additional questions, I the turn no now further Snee any remarks. at Jim for to

Hormel you. team in to behalf for Great, today. all our On to Foods, us thank that you here for marketplace. team thank be the thank allows the members so joining you our you tireless of all at work To company successful your of in, listening

results and focus uncommon accountability the to our company Your will safe Thanksgiving. our happy maintaining a continue delivering marketplace. in this Have and on of make culture key

Thank And participation. for concludes your this call. today's you

now may disconnect. You