June 6, 2008

Smithfield Q4 earnings drops 93 percent
   

Smithfield Foods has reported a 93 percent drop in fiscal fourth-quarter net income, a result of lower hog prices and higher input costs.

Smithfield's net income for the fourth quarter reached only US$2.4 million, compared with US$37.1 million from the previous year.

Earnings plummeted to one cent per share from 46 cents while sales rose 20 percent to US$2.87 billion amid acquisitions. These results are far below the mean estimates by analysts who expected earnings of seven cents per share and revenue of US$3.55 billion.

Smithfield's gross margin reached 7.2 percent, down from 12 percent. Pork sales rose 19 percent to US$2.45 billion, as earnings surged 76 percent due to export growth, improvement in packaged-meats margins and from Premium Standard, a pork producer acquired by Smithfield last year.

Smithfield president and chief executive Larry Pope expressed his concern about the rising grain costs, which he blames on the ethanol policy.

Pope also said while sow slaughter numbers have been favourable, it would take several months to correct the oversupply situation.

Smithfield is currently focusing to improve its cost structure and implement price increases as market permit, an options which is forced upon them due to rising grain prices, according to Pope.