Smithfield to meet covenants, AH1N1 impact waning
Smithfield Foods Inc on Wednesday (May 13) said it expects to meet its fiscal 2009 fourth-quarter debt covenants and appears to be on track to comply with fiscal 2010 covenants.
It also said pork exports are recovering after being disrupted recently when countries banned the meat as a precaution against the AH1N1 strain of flu.
Smithfield Chief Executive C. Larry Pope said the company has paid US$900 million in debt this past year and will pay down more and improve liquidity.
Smithfield raises hogs and produces pork and, like other meat companies, has been hurt by high feed costs and a slowdown in meat sales, particularly in restaurants, due to the recession.
It has closed plants, restructured operations, pared its hog herd, and negotiated new debt agreements.
There have been concerns about the company's ability to meet debt covenants, but Pope said the company should comply this fiscal year, which ended in April, and next year.
The company will report its fiscal year and fourth quarter results on June 16.
Wall Street analysts, on average, expect it to report a fiscal year loss of US$154.58 million, or US$1.23 a share, and a fourth quarter loss of US$52.8 million, or 50 cents a share, according to Reuters Estimates.
Pope said that while the AH1N1 outbreak or previously known as swine flu, that began in April, has hurt pork sales, business is recovering both domestically and in export markets,
The flu is spread by humans, not hogs or pork, but many countries still banned pork.
Some countries have lifted the bans on pork and sales to Mexico are recovering, he said.
High feed costs, combined with a slowdown in pork sales due to the recession, produced losses for hog producers throughout 2008 and early in 2009. To cope, Smithfield and other producers reduced herds.
Pope said it is possible that the company may lose money for fiscal 2010 raising hogs but he is optimistic that meat business "will be terrific and our international business has improved very nicely".
