March 2, 2005

 

Smithfield earnings get a boost by hog prices

 

 

Smithfield Foods Inc. a top hog and pork producer on Tuesday said quarterly earnings doubled as higher hog prices more than offset lower results in its pork processing and beef segments.

 

Results in the current quarter should also rise from a year earlier, said Chairman Joseph Luter

 

Smithfield and other US hog producers have benefited from high hog prices. Hogs have been in demand due to record pork exports and strong pork sales in the United states.

 

For the fiscal third quarter ended Jan. 30, Smithfield's net earnings rose to $97.5 million, or 87 cents per share, from $46.1 million, or 41 cents per share, a year earlier.

 

Hog prices were up 48 percent in the quarter compared with a year earlier. Smithfield has the nation's largest hog herd, producing about 14 million market hogs a year. It is also the leading US pork processor and a major beef producer.

 

"Through our vertical integration strategy, our pork processing and hog production operations combined to produce a record quarter from operations, even though we had no earnings contribution from our beef business," Luter said in a statement.

 

"It is demand that is driving it," Ron Plain, agricultural economist at the University of Missouri, said of the hog market. "There is definitely no shortage of hogs and no shortage of pork."

 

Smithfield's hog segment had an operating profit of $145.1 million, compared with a year-earlier loss of $7.8 million.

 

The pork processing unit's profit fell by half, to $49.8 million from $99.6 million, as the higher hog prices increased production costs.

 

The beef unit, the fifth-largest in the country, had a $200,000 operating loss, compared with a year-earlier profit of $7.4 million, as closed export markets, tight cattle supplies, and higher cattle prices hurt results.

 

US beef remains banned by many countries after the United States reported its sole case of mad cow disease in December 2003. Also, Smithfield and other beef companies have had to pay high prices for tight supplies of cattle.

 

Smithfield's total revenue for the third quarter was $3.06 billion, up from $2.70 billion a year earlier.