Hormel beats 2Q profit forecasts despite bird flu woes

Updated 10 a.m. | Posted 8:09 a.m.

Hormel Foods posted a strong second quarter despite significant problems caused by the avian flu outbreak.

Profits hit $180.2 million, up nearly 30 percent from the same quarter last year, the Austin, Minn.-based company reported Wednesday.

The profit jump, which beat Wall Street expectations, came as Hormel struggled through turkey supply problems caused by the bird flu.

Hormel CEO Jeff Ettinger, however, said sales at the company's Jennie-O Turkey Store unit are expected to drop 15 percent for the second half of the year.

"This sizable estimated loss of volume is not only due to bird losses over the past month, but also takes into account the fact that many of our barns remain empty, under quarantine," said Ettinger.

The company, which makes Spam canned ham, Dinty Moore stew and other foods, will buy some turkeys from outside Hormel's usual supply chain, but at higher prices, he added.

Some 55 farms supplying turkeys for Jennie-O have been hit by avian flu. Earlier this month, the company laid off more than 200 workers at its Faribault turkey processing plant in what appeared to be the first mass layoff in Minnesota tied to avian influenza.

Ettinger said the disease poses significant challenges for Hormel's turkey business.

"It's kind of exposed a little bit of an Achilles heel to the strategy of being very centralized," he said.

"It had been a tremendous advantage in the past," he added. "In terms of just knowledge of feed within an area and growing practices, the ability to move meat from plant to plant to optimize products ... all of our facilities are either in Minnesota or Wisconsin."

The Associated Press contributed to this report.