March 5, 2012

 

Smithfield Foods sees strong 2012 growth

Smithfield Foods expects a strong performance in 2012, said Bo Manly, Smithfield Foods' CFO.

 

"It's unlikely we'll exceed last year's levels, but we'll likely have the second best year in

Smithfield's history," he said.

 

Manly said that exports are expected to grow and the company's emphasis on packaged meat will continue.

 

The company's pork division (including sales of packaged meats and fresh pork), accounts for nearly 75% of Smithfield Foods' operating profit, which amounted to US$753 million in FY11.

 

"This is the growth area", commented Manly, who added that the company's hog production and international divisions are supporting the remaining sales.

 

According to data presented by the CFO, Smithfield Foods has a 28% share of the US processed pork market in 2011. Its closest large rivals are Tyson Foods at 17%, JBS at 11%, Cargill 9% and Hormel 8%.

 

He went on to say that last year his company was also the largest live hog producer in US with a 14% market share with about 16 million pigs raised. The closest large rivals were Triumph at 6%, Seaboard at 4%, Maschhoffs at 3% and Prestage at 3%.

 

In FY11, 45% of the company's pork sales and 39% of its volume went to the retail industry, of which 75% were branded sales (Smithfield Foods' core top 10 brands accounted for 87% of branded sales. In some segments, the company outperformed the industry.

 

For instance, bacon and hot dog sales dropped in Q4 by 3% and 2% respectively. However, Smithfield's branded bacon and hot dog sales grew 10% and 4% respectively during that time.

 

Manly said the company continues to invest more in its core packaged meat brands "which is where the stability and the profitability are." Smithfield Foods will be also buoyed by strong exports. "Economics are supportive of US pork exports", he said and showed that US hog carcasses are trading for US$0.63/pound, whereas EU carcasses are more at US$0.66, Brazil at US$0.67, and Mexico at US$0.86 per pound.

 

In H1 FY12 Smithfield's export volumes increased 37% and dollar sales were up 54%. China was the company's main destination market with 37% of its exports, then Japan at 23%, Mexico at 19% and Russia at 5%.

 

Manly went on to say that his company continues to look for acquisitions opportunities mainly overseas, especially in China. There are also packaged meat opportunities in Romania, Poland, and Mexico.

 

The CFO also said that Smithfield Foods is monitoring the business division split situation at Sara Lee.

 

He commented, "People are coming to see us asking if we want to buy Sara Lee meats. We ask when it is for sale and nobody is able to answer that. We like Sara Lee, but everybody does. It is a good fit for a certain number of companies and we would certainly take a look at it. Other than that there has been no more activity there".