Smithfield suffers loss in FY10

 

 

Smithfield Foods, the largest pig and pork producer in the US, suffered a loss of US$101.4 million for its 2010 fiscal year, ending on May 2.

 

The company noted, however, that this result was an important improvement over the results of 2009, when there was a loss of US$198.4 million. In addition, the company said that operating results 'improved significantly' in all business segments.

 

Virtually, all of the loss was attributed to the company's pig production division, which had an operating loss of US$460.8 million 2010, compared with an operating loss of US$521.2 one year earlier.

 

Smithfield CEO Larry Pope said, "The last two years were by far the most challenging in over 30 years. The contributing factors - global recessionary conditions, unfounded fears about AH1N1 and the resultant closures of some key export markets, spiking grain prices and extended low hog prices tied to a significant oversupply of live hogs - are all well documented.

 

He also noted that these factors, combined with the extremely slow pace of herd liquidation in spite of mounting industry losses, all conspired to make for one of the longest and deepest downturns ever in live hog production.

 

In addition, he said the company is initiating a new hog production cost savings initiative aimed at significantly improving its competitive position.

 

Pope added that there were a number of bright spots in the year, including completion of the pork group's restructuring, which achieved its targeted US$55 million of profit improvement in the year, and record results for its packaged meats segment.

 

Meanwhile, feed prices have come down again, a 13% reduction of the company's sow herd has been achieved creating higher pig prices and demand to pork has risen. Pope also said fiscal 2010 was the company's second-best ever export year despite the closure of the Chinese and Russian markets.

 

Analysts have tempered their expectations for Smithfield Foods' 2011 earnings performance a day after the pork producer posted a fourth-quarter loss due to ill-timed hog futures hedges.

 

Earlier, Smithfield also disclosed that it has offered to acquire its joint venture partner's 51% majority ownership in Butterball for US$200 million, a maneuver that, according to the ownership agreement, requires its partner, Maxwell Farms, to either sell that interest or buy Smithfield's 49% minority share.

 

Butterball is the largest turkey integrator in the US and was included in Smithfield's acquisition of the branded meats business of ConAgra Foods four years ago.