September 5, 2012

Smithfield reports quarterly profit below analysts' estimates

Smithfield Foods Inc. reported a quarterly earning below analysts' estimates as higher supplies and weak retail demand in the US hurt its fresh pork business.

Operating margin in the fresh pork segment fell to negative 1% in the first quarter from 3% a year earlier.

The company, which owns the Farmland, Smithfield, Armour and John Morrell brands, said margins have improved considerably since the end of the quarter.

Operating margin in the hog production business also contracted during the quarter ended July 29, as the worst US drought in more than half a century spiked grain costs, pushing up the cost of raising hogs.

Companies such as Smithfield Foods, Sanderson Farms Inc. and Maple Leaf Foods, one of Canada's biggest meat processors and bakers, have been hurt by a rise in feed costs associated with the drought in the US Midwest.

Smithfield expects the higher raising costs to be offset by favourable grain hedges for fiscal 2013. The company's first-quarter net income fell to US$61.7 million, or US$0.40 per share, from US$82.1 million, or US$0.49 per share, a year earlier.

Profit from the latest quarter was below the US$0.44 analysts had estimated, according to Thomson Reuters I/B/E/S. Revenue was US$3.09 billion for the quarter, also missing analysts' average estimate of US$3.15 billion.

Smithfield shares, which have lost about a fifth of their value this year, fell 3% to US$18.78 in premarket trading on Tuesday (Sep 4). They had closed at US$19.32 on Friday (Aug 31) on the New York Stock Exchange.