McCormick & Co Inc (MKC) Q2 2025 Earnings Call Highlights: Navigating Growth Amidst Global ...
Total Organic Sales Growth: Increased by 2% for the quarter, driven by volume and mix.
Consumer Segment Organic Sales: Increased by 3%, with 4% volume growth in the Americas.
Flavor Solutions Segment Organic Sales: Flat, with a 1% contribution from price offset by a 1% decline in volume and mix.
Gross Profit Margin: Flat compared to the previous year, impacted by higher commodity costs.
Adjusted Operating Income: Increased by 10%, or 11% excluding currency impacts.
Adjusted Earnings Per Share: $0.69, comparable to the previous year.
Cash Flow from Operations: $161 million, down from $302 million in the previous year.
Capital Expenditures: $85 million used for capital expenditures.
Tariff Exposure: Total gross annualized tariff exposure approximately $90 million, with $50 million in-year exposure for 2025.
2025 Financial Outlook: Net sales growth expected between 1% and 3%, with adjusted EPS projected at $3.03 to $3.08.
Warning! GuruFocus has detected 5 Warning Signs with MKC.
Release Date: June 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
McCormick & Co Inc (NYSE:MKC) reported a 2% increase in total organic sales for the second quarter, driven by volume growth, particularly in the Consumer segment.
The company achieved volume growth of more than 3% in the Consumer segment, with strong performance in the Americas and EMEA regions.
McCormick & Co Inc (NYSE:MKC) continues to see strong demand for its products, driven by consumer trends towards flavorful, fresh, and healthy meals.
The company is effectively managing tariff impacts through strategic sourcing and cost-saving initiatives, maintaining its volume-led growth and operating profit outlook for 2025.
McCormick & Co Inc (NYSE:MKC) is expanding its distribution and launching new products, such as air fryer seasonings and finishing salts, to drive growth and meet consumer demand.
The Flavor Solutions segment experienced a decline in volume, particularly in the EMEA region, due to softness in customer volumes and geopolitical boycotts.
The company faces increased cost pressures from the global trade environment, impacting its gross margin expectations for 2025.
McCormick & Co Inc (NYSE:MKC) is experiencing softness in volumes from some large CPG customers, affecting its Flavor Solutions segment.
The company anticipates continued challenges in the quick service restaurant (QSR) sector in EMEA, impacting its performance in that region.
McCormick & Co Inc (NYSE:MKC) reported a decrease in cash flow from operations compared to the previous year, driven by higher cash used due to the timing of working capital.
Q: Brendan, McCormick had been indicating that EBIT growth would be more weighted towards the second half, but second-quarter EBIT was stronger than expected. What contributed to this outcome? A: Brendan Foley, CEO: Our consumer business performed well, driven by volume across core categories, and we built share. In Flavor Solutions, we navigated tough conditions better than most. Marcos Gabriel, CFO, added that strong operating profit delivery was driven by SG&A efficiencies, including stock-based compensation and CCI program initiatives.
Q: Can you elaborate on the tariff mitigation actions and how you balance cost work with strategic pricing? A: Marcos Gabriel, CFO: The majority of mitigation actions are driven by sourcing and CCI. We use data analytics for buying decisions and sourcing locations. Pricing is the residual, and we apply it surgically, using analytics to assess elasticity and maintain volume momentum.
Q: Could you provide more detail on the gross tariff exposure of $90 million and the impact of the global trade environment on costs? A: Marcos Gabriel, CFO: Our tariff exposure is related to raw materials not grown in the US. We use a blended tariff rate to estimate a 2% impact on COGS globally. The global trade environment has not driven expected lower costs, impacting our gross margin, which we plan to offset through SG&A initiatives.
Q: How are you managing sourcing opportunities without sacrificing quality? A: Brendan Foley, CEO: Quality remains a top priority, and we procure items that meet our high-quality requirements. Marcos Gabriel, CFO, emphasized that there is no trade-off between quality and price, and our sourcing organization ensures both.
Q: What is the outlook for the Flavor Solutions segment in the second half of the year? A: Brendan Foley, CEO: In the Americas, we expect trends to sustain, with potential improvement if QSR traffic increases. In EMEA, we anticipate stabilization against weaker prior-year performance. Asia Pacific trends are expected to remain consistent with the first half.
Q: How are discussions with retailers regarding innovation and pricing? A: Brendan Foley, CEO: We have positive, productive conversations with retailers, focusing on category growth and consumer needs. Our strong category management, innovation, and brand marketing support drive collaborative and successful retailer relationships.
Q: Are you confident in achieving long-term objectives despite tariff impacts? A: Brendan Foley, CEO: Yes, we remain confident in our long-term objectives. While we adjust plans as needed, tariffs have not derailed our long-term strategy.
Q: What is the level of innovation activity from large CPG customers, and how does it benefit McCormick? A: Brendan Foley, CEO: We see increased reformulation and innovation activity, particularly in health and wellness categories. This activity is incremental and benefits McCormick through strong win rates and collaboration with customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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