February 29, 2008

Smithfield reports 10-percent fall in Q3 profits and forecast difficult Q4
 

Smithfield Foods reported a 16-percent increase in revenue to US$3.8 billion from US$3.3 billion despite a 10-percent decrease in its third quarter profits, while forecasting a difficult fourth quarter ahead.

The company's third quarter net income amounted to US$54.6 million from US$60.4 million in the same quarter a year earlier.

The company's pork segment has doubled its profits due to its acquisition of Premium Standard Farms in May 2007, lower raw material costs, improvement in packaged meats margins and a significant growth in exports.

However, the company's hog production operations have lost US$81 million due to lower hog prices and rising production costs.

Smithfield has also announced last week that it would be reducing its US sow herd by 4-5 percent, which is 40,000 to 50,000 sows.

The company said hog prices averaged US$37 per 100 pounds for the third quarter, down from US$44 a year ago, while production costs have increased to US$49 from US$42 a year ago.

"We are in an environment where raising hogs is not profitable," said Larry Pope, CEO of Smithfield.

Several of the company's precooked product lines have also shown a double-digit growth.

The company's beef segment has also witnessed an increased profit of more than US$11 million.

In addition, Smithfield has forecast a difficult fourth quarter as its hog productions may continue to suffer losses. Pope has however, stated his confidence in the pork export market, which would lend support to the hog and pork markets.