March 9, 2012

 

 

Helped by lower expenses, Smithfield Foods Inc reported a better-than-expected quarterly profit and signalled that the market for pork and hog production was strong.

 

Strong global demand for pork helped support prices for Smithfield, the largest US pork and hog producer. At the same time, the company sees the costs for raising hogs easing in fiscal 2013.

 

"Supply and demand remained well in balance, as healthy global demand for pork, particularly from Asia, drove double-digit increases in both export volume and dollars," said Chief Executive Larry Pope.

 

Third-quarter net income fell to US$79 million, or US$0.49 per share, from US$202.6 million, or US$1.21 per share, a year earlier, hurt by higher raw material costs.

 

Live hog market prices rose 23%, while wholesale pork prices only rose 11%, the company said.

 

Excluding US$0.20 per share in charges related to restructuring and debt payments, the company's earnings were US$0.69 a share. Analysts had expected US$0.66 a share, according to Thomson Reuters.

 

The company's selling, general and administration expenses only came to 5.4% of sales, below the 6.1% Wall Street was expecting, according to JPMorgan analyst Ken Goldman.

 

Smithfield said the costs for raising hogs would be in the mid US$60s range per hundred pounds for this fiscal year and average in the low US$60s per hundred pounds for next fiscal year.

 

The company sees healthy export demand continuing to support its fresh pork segment even as US protein supplies shrink.

 

Sales rose 9% to US$3.48 billion, missing analysts' expectations of US$3.49 billion. Sales at its fresh pork segment grew about 11% during the quarter.

 

Shares of the Smithfield, Virginia-based company were up 2% at US$23.30 in early trading on the New York Stock Exchange.