Updated version 6 - Despite weak demand, McCormick's price increases added highlights to its quarterly performance

The second paragraph updates the share price in bullet points

Anuja Bharat Mistry/Alexander Marrow

Reuters, October 1 - McCormick & Company (MKC.N) on Thursday reported quarterly growth in both sales and profits, driven by increases in the price of seasonings and sauces, partially offsetting the impact of higher gasoline prices and reduced consumer demand due to a Cyclospora outbreak, which led to weaker sales.

Like other branded food companies, McCormick faces rising costs and consumer pressure to switch to cheaper private-label products due to a strained economy. The company’s shares have fallen about 32% so far this year, and dropped around 3% more on a volatile trading day, hitting the lowest level since December 2016.

This Cholula hot sauce maker and its competitors – such as Conagra Brands (link) CAG.N and General Mills (link) GIS.N – have all raised prices to maintain margins amid U.S. tariff uncertainties and surging input costs owing to Middle East tensions.

“In the U.S., rising gas prices and the Cyclospora outbreak have added to the pressure, leading to decreased traffic in both foodservice and grocery channels,” CEO Brendan Foley said in prepared remarks.

Cyclospora is a foodborne parasite that sickened thousands of Americans this summer. McCormick said the outbreak mainly impacted fast-food restaurants.

In the quarter ending August 31, McCormick’s average selling price rose 2.2% over the same period last year, while organic volume slipped 0.3%. Last quarter, sales volume had fallen 0.5%.

McCormick’s main “Americas Consumer” division saw sales fall 2.5% this quarter, making it the company’s only segment to post a decline.

As it navigates an uncertain consumer spending environment, the company maintained its annual earnings outlook for the third time this fiscal year.

McCormick executives also said on the earnings call that they expect fourth-quarter margins to come under pressure due to increased commodity and freight costs, as well as higher commercial investments in the Americas Consumer division.

“The recovery in Americas Consumer volume is slower than expected and is likely to remain the focus for investors,” Barclays analysts said in a note.

McCormick also stated that integration planning for the proposed $65 billion merger with Unilever’s ULVR.L food business (link) is progressing as scheduled, and the company remains confident that the deal will deliver significant per-share earnings growth after completion.

According to data compiled by London Stock Exchange Group (LSEG), the company reported third-quarter revenue of $2.02 billion, beating analysts’ average estimate of $1.98 billion.

Adjusted earnings per share for the quarter were $0.86, compared with the $0.76 expected.

(For the convenience of non-English speakers, Reuters provides its reports in several other languages through automated translation. Because automated translation may be inaccurate or lack necessary context, Reuters does not guarantee the accuracy of translated texts and provides them solely for readers’ convenience. Reuters accepts no responsibility for any harm or loss caused by use of the automated translation feature.)