• Total Organic Sales Growth: Increased by 2%, driven by volume and product mix growth.
• Global Consumer Segment Organic Sales: Increased by 1%, with 3% volume growth offset by a 2% pricing impact.
• Global Flavor Solutions Segment Organic Sales: Increased by 3%, driven by 2% volume growth and a 1% price contribution.
• Gross Profit Margin: Expanded by 20 basis points, primarily due to the Comprehensive Continuous Improvement program.
• Adjusted Operating Income: Decreased by 5%, or 3% in constant currency, due to increased SG&A expenses.
• Adjusted Earnings Per Share: $0.60, compared to $0.63 in the prior year, impacted by increased SG&A and currency effects.
• Cash Flow from Operations: $116 million, down from $138 million in the previous year, due to higher working capital usage.
• Capital Expenditures: $37 million, with fluctuations expected based on project timing.
• 2025 Financial Outlook: Maintained guidance with expected organic net sales growth of 1% to 3% and adjusted EPS growth of 5% to 7% in constant currency.

• Warning! GuruFocus has detected 6 Warning Signs with MKC.

Release Date: March 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• McCormick & Co Inc (NYSE:MKC) reported a 2% increase in total organic sales for the first quarter, driven primarily by volume and product mix growth.
• The Global Consumer segment saw volume-led organic sales growth, with robust performance across key markets.
• The company achieved strong volume growth in all three regions, supported by investments in brand marketing, innovation, and expanded distribution.
• The Flavor Solutions segment also experienced volume-led organic sales growth, with improvements in QSR customer performance in Asia Pacific and the Americas.
• McCormick & Co Inc (NYSE:MKC) maintained its 2025 financial outlook, expecting gross margin expansion and operating income growth on a constant currency basis.

Negative Points

• The first quarter adjusted operating income declined by 5%, impacted by increased SG&A expenses and stock-based compensation shifts.
• Consumer sentiment remains uncertain due to inflation concerns, impacting consumer behavior and spending patterns.
• The Flavor Solutions segment faced challenges with softness in larger CPG customer volumes, particularly in the Americas and EMEA.
• The foodservice environment remains challenging, with flat performance in branded foodservice in the Americas and soft QSR traffic in EMEA.
• Currency fluctuations negatively impacted adjusted earnings per share by approximately $0.03 per share.

Q & A Highlights

Q: What drove the stronger-than-forecast operating profit decline in the Consumer segment, and what gives you confidence in reaffirming the full-year guidance? A: Brendan Foley, CEO, explained that Q1 was roughly in line with expectations, with planned timing elements impacting results. Marcos Gabriel, CFO, added that the 5% decline in operating profit was 3% on a constant currency basis. Timing-related items, such as stock-based compensation and brand marketing investments, impacted Q1 but are expected to normalize. The company remains confident in its full-year guidance due to strong sales performance and expected margin expansion.

Q: Can you provide more context on the pricing strategy in the Americas Consumer business and its impact on future pricing? A: Brendan Foley, CEO, noted that the price gap management in Q1 was tied to seasonal promotions, particularly in recipe mixes like chili and gravy. The company does not expect significant price changes for the rest of the year, with volume growth being the primary driver. EMEA may see some pricing adjustments due to commodity pressures, but overall, pricing is expected to be flat globally.

Q: How did new high-growth customers and QSRs contribute to sales in the Flavor Solutions segment, and how did CPG customer weakness impact this? A: Brendan Foley, CEO, stated that high-growth customers, particularly in health and wellness segments, contributed significantly to sales, along with QSRs through innovation wins and new customer acquisitions. While there was softness in larger CPG customer volumes, the company outperformed in many categories, offsetting this weakness.

Q: Are you seeing any uptick in reformulation efforts by CPG or restaurant customers in the US due to potential regulatory changes? A: Brendan Foley, CEO, acknowledged an increase in reformulation activities, driven by trends towards healthier options, including sodium reduction and functional foods. While reformulation has always been part of their work, recent regulatory discussions have accelerated these efforts.

Q: What should investors look for regarding key tariff risks and the company's response? A: Brendan Foley, CEO, mentioned that known tariffs on China are already accounted for in their guidance. The company is monitoring potential new tariffs closely and is prepared to manage them based on past experiences. The situation remains fluid, and they are considering various scenarios.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.