June 10, 2004

Smithfield Foods Profit Soars On Gain, Jump In Hog Prices

Smithfield Foods Inc.'s (SFD) fiscal fourth-quarter profit surged higher as the company booked a big gain on the sale of its Canadian unit and hog prices rose 33%.

The meat and pork processor Wednesday reported net income of $122.7 million, or $1.09 a share, for the quarter ended May 2, up from $5.1 million, or five cents a share, a year earlier.

The latest results included a gain of $49 million, or 44 cents a share from the company's April sale of its Canadian operation, Schneider Corp.

Absent the gain and results from Schneider, earnings from continuing operations came to $71.1 million, or 63 cents a share. That included costs of $6.8 million related to a bridge loan used to finance last year's acquisition of Farmland Industries Inc.'s pork-production and processing business.

Sales jumped 44% to $2.52 billion from $1.75 billion, aided by the purchase of Farmland Foods.

Operating profit from the company's pork segment improved 70% to $84.1 million, aided by strong results of Farmland and demand for fresh pork.

The hog production group posted operating profit of $72.1 million compared to a loss of $25.1 million last year, thanks to a substantial increase in live hog prices. Live hog prices averaged over $46 per hundredweight, compared with under $35 per hundredweight in the year-earlier quarter.

Operating profit at the beef segment fell 82% to $3.2 million. Still, that represented a return to profitability after months of unprofitable operations following the discovery of a case of mad-cow disease in Washington state in 2003 and the subsequent ban on beef exports from the U.S. to most foreign countries.

Looking ahead, Smithfield said 2005 "could well be another record year" as hog prices remain high, pork demand is strong, and beef margins continue to be favorable. The company unveiled plans to increase bacon production capacity by 20% as part of an effort to sell more processed meats.

For the year ended May 2, Smithfield posted net of $227.1 million, or $2.03 a share, up from $26.3 million, or 24 cents a share, the previous year. Sales increased 30% to $9.27 billion from $7.14 billion.