McCormick
Q3 2022 Earnings Call
Oct 06, 2022, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Kasey Jenkins
Good morning. This is Kasey Jenkins, chief strategy officer and senior vice president, investor relations. Thank you for joining today's third quarter earnings call. To accompany this call, we posted a set of slides at ir.mccormick.com.
With me this morning are Lawrence Kurzius, chairman and CEO; Brendan Foley, president and COO; and Mike Smith, executive vice president and CFO. During this call, we will refer to certain non-GAAP financial measures. The nature of those non-GAAP financial measures and the related reconciliations to the GAAP results are included in this morning's press release and slides. In our comments, certain percentages are rounded.
Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or other factors.
Please refer to our forward-looking statements on Slide 2 for more information. I will now turn the discussion over to Lawrence.
Lawrence Kurzius -- Chairman and Chief Executive Officer
Good morning, everyone. Thanks for joining us. Third quarter sales increased 3% from the year-ago period as anticipated. In constant currency, sales grew 6%, reflecting 10% growth from pricing actions, partially offset by a 1% decline from the kitchen basics divestiture, a 1% decline attributable to the exit of low-margin business in India and the consumer business in Russia, and a 2% decline in all other volume and product mix.
Our underlying third quarter growth reflects the strength of our broad global portfolio, as well as the effective execution of our strategies and pricing actions against the backdrop of a volatile operating environment. Using 2019 as a pre-pandemic baseline, third quarter sales grew at a constant currency three-year compounded annual growth rate, or CAGR, of 7%, reflecting the sustained momentum in our business across both our consumer and flavor solutions segments. Moving to profit, adjusted operating income was down 12%, or 11% in constant currency, and adjusted earnings per share was down 14%. During the third quarter, supply chain challenges continued, and recovery of certain constrained materials is taking longer than expected.
We continue to incur elevated costs to meet high demand in our flavor solutions segment. While in our consumer segment, where demand moderated from elevated consumption trends more quickly than expected, we are experiencing lower than optimal operating leverage. Across the supply chain, we remain focused on managing inventory levels and eliminating inefficiencies. So, the normalization of our supply chain costs is taking longer than expected, pressuring gross margin and profit realization in the current period.