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Hormel Q2 results miss expectations; Kroger to buy meal-kit company

TOP NEWS

* Hormel Foods Corp. on May 24 reported fiscal second-quarter results that missed analysts' expectations as revenue from its turkey and grocery businesses fell on an organic basis, but it confirmed its guidance for the fiscal year. The maker of Spam luncheon meat and Dinty Moore beef stew said diluted EPS for the 13 weeks ended April 29 rose to 44 cents from 39 cents in the same period a year ago. The S&P Capital IQ mean consensus of analysts' estimates had forecast normalized EPS of 45 cents. The company continues to expect net sales of between $9.70 billion and $10.10 billion and EPS of between $1.81 and $1.95.

* Kroger Co. will buy Illinois-based meal-kit delivery company Home Chef. The Ohio-based company will pay $200 million and "future earnout payments" of up to $500 million over five years, contingent on achieving certain milestones, including significant growth of in-store and online meal kit sales. Kroger expects to close the transaction in the second quarter of 2018, subject to customary closing conditions, including regulatory approval.

BEVERAGES

* Asahi Group Holdings Ltd. plans to reduce its debt by about 20%, or ¥260 billion, by December 2019, eyeing a better position to plan acquisitions to grow beyond Japan, the Nikkei Asian Review reported. The Japanese brewer's debt reportedly piled up after it spent about ¥1.2 trillion to acquire several European beer brands from Belgian rival Anheuser-Busch Inbev SA/NV. CFO Kenji said the company will prioritize strengthening of its finances while working on its flexibility for acquisition and growth investments, as it expects to average over ¥140 billion per year in free cash flow to help pay down its debt load.

* Soft drinks company Britvic PLC revenue increased 4.5% to £733.2 million for the 28 weeks ended April 15. The bottler of PepsiCo Inc. in the U.K. said its adjusted earnings per share for the period rose to 21.2 pence from 18.9 pence reported in the year-ago period. The S&P Capital IQ mean consensus estimate for normalized EPS was 19 pence.

* Alibaba Group Holding Ltd. launched a "smart ordering" system that can catch order changes, corrections or updates made by customers verbally at restaurants and cafes. However, it only works for Chinese speakers. The technology has spoken-language understanding, including speech processing and natural-language processing, and can capture voice and visual features. Machines that feature the AI technology will be available over the next few months and the technology will be available on Alibaba Cloud for the benefit of small and medium-sized enterprises.

PACKAGED FOODS

* U.S. food processor Campbell Soup Co. appointed Roberto Leopardi as president of its Campbell Meals & Beverages division, effective June 4, which includes its North American soup, sauces and shelf-stable beverage brands.

* Nestlé SA is set to merge its two research units in order to strengthen its research and development capabilities and speed up product innovation. The Nestlé Research Center and the Nestlé Institute of Health Sciences will be combined into a new organization called Nestlé Research, effective July 1. The new entity, which will be based in Lausanne, Switzerland, will employ about 800 people, the company said.

* Swiss food giant Nestlé SA made a strategic investment in China's Ningxia Cezanne Dairy Industry Co. for an undisclosed amount, Chinese-language newspaper Securities Daily reported May 24, citing the companies at an event. As part of the agreement, Nestlé sold a 95% stake in its Hulunbuir dairy plant in Inner Mongolia to a shareholder of Cezanne Dairy, while retaining 5% of the unit, according to the report. Meanwhile, Nestlé also acquired a 6% stake in Cezanne Dairy.

* Tate & Lyle PLC, a London-based packaged foods company, reported diluted earnings per share of 56.1 pence for the year ended March 31, compared to 54.2 pence per share reported in the year-ago period. The company's profit before tax for the year escalated to £286 million from £233 million, while sales dropped 2% to £2.7 billion, the company said.

* Packaged food retailer Uno Foods Inc. recalled about 1,881 pounds of ham and cheese calzones due to misbranding, according to a release from the U.S. Department of Agriculture's Food Safety and Inspection Service. The 8-count packages, which are labeled "UNO PIZZERIA & GRILL Ham & Cheese handcrafted Calzone," with the best-before date of May 1, 2019, contain 6-ounce buffalo chicken calzones.

* Dairy Crest Group PLC plans to invest £85 million to expand cheese production capacity in its facility at Davidstow in Cornwall to 77,000 tons per year from its current limit of 54,000 tons per year to meet expected growth in demand for cheese. To fund its expansion plans, the company plans to use the proceeds from its proposed sale of 14,107,224 new ordinary shares of 25 pence per share, which represents about 9.98% of its current issued share capital, to institutional investors at a price of 495 pence per share.

* To expand its presence in specialty cheese and yogurt, Canadian packaged food company Saputo Inc. entered an agreement to acquire the activities of specialty cheese and yogurt manufacturer Shepherd Gourmet Dairy (Ontario) Inc. at the latter's Ontario-based plant for C$100 million. The transaction will be paid in cash from cash on hand and available credit facilities and is expected to close in June.

* Leroy Seafood Group Asa will distribute an annual dividend of 1.50 Norwegian kroner per share to stockholders registered as of May 23 on June 4. The dividend is an increase from its annual dividend of 1.30 kroner per share in 2017. Leroy Seafood also appointed Siri Lill Mannes to its board.

RESTAURANTS

* Burrito chain Chipotle Mexican Grill Inc. is moving its headquarters from Denver to Newport Beach, Calif. Chipotle will also close its offices in Denver and New York. In the next six months, Chipotle will transition its Denver and New York office functions to its Newport Beach and Columbus, Ohio, offices.

INDUSTRY NEWS

* Protests against high diesel prices in Brazil have affected the operations for sugar producers and soybean processors in the country, where plants are unable to function because of a shortage of raw materials, Reuters reported. A sugarcane group and a soybean crushers association reportedly said harvesting and delivery of cane and soybeans have drawn to a halt due to the protests. They did not identify the plants that have been impacted. The soybean association informed its members about possible delays in deliveries, the report said.

The day ahead

Early morning futures indicators pointed to a mixed opening for the U.S. market.

In Asia, the Nikkei 225 dropped 1.11% to 22,437.01, while the Hang Seng was up 0.31% to 30,760.41.

In Europe, around midday, the FTSE 100 slid 0.01% to 7,787.43, and the Euronext 100 rose 0.44% to 1,080.45.

On the macro front

The jobless claims report, the FHFA House Price index, the existing home sales report, the EIA natural gas report, the Kansas City Fed Manufacturing index, the Fed balance sheet and the money supply report are due out today.

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