MILWAUKEE - Hormel Foods, maker of Spam, Dinty Moore stews and Chi-Chi's Mexican products, said Thursday that its third-quarter profit rose 49 percent to beat estimates as costs fell.

But sales and volume fell for the Austin, Minn.-based company as consumers limited their spending on more expensive products like microwavable meals. But sales of canned items and brands like Spam and Hormel chili remained strong.

The company earned $77.2 million, or 57 cents per share, in the three months ending July 26. That's up from earnings of $51.9 million, or 38 cents per share, a year earlier.

Analysts polled by Thomson Reuters had predicted 52 cents per share in profit.

Hormel said its net interest and investment income was "significantly improved." It also said operating profit was better in grocery products, refrigerated foods and its Jennie-O Turkey Store brand. It reported lower costs for feed as it reduced turkey production.

Revenue and sales volume both fell in the quarter. CEO Jeffrey Ettinger said in a news release the 4 percent volume drop was due to reductions in turkey production and the weak economy affecting sales.

Revenue fell 6 percent to $1.57 billion from $1.68 billion. Analysts had expected $1.7 billion.

The company said its grocery products segment, which includes Spam, posted an 8 percent drop in volume, and 6.2 percent drop in revenue. But if sales from a recently discontinued olive oil line are excluded, net sales were even.

The refrigerated foods segment, which makes up more than half of the company's sales, had a 1 percent decrease in volume, while dollar sales fell 5 percent. Sales of Hormel pepperoni and party trays, and DiLusso Deli Company products were all strong, limiting the effects of a difficult pork market.

Pork prices have fallen as demand weakens amid an oversupply on the market, which keeps prices down. Much of the meat industry, including Hormel's Jennie-O Turkey Store, has been hurting due to record high ingredient costs last year and an oversupply on the market as consumers limit eating out. Many of the companies, including Hormel, are cutting production to restore pricing.

Conditions in the Jennie-O Turkey Store improved in the quarter, as production cuts were felt, and profit rose 97 percent. Volume slipped 2 percent and dollar sales fell 5 percent.

Earlier this month, Hormel raised its 2009 profit guidance, which it left unchanged Thursday. It reiterated that it would earn yearly profit in a range of $2.36 to $2.42.

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AP Business Writer Vinnee Tong contributed to this report from New York.

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