September 9, 2010

 

High pork prices aids Smithfield's fiscal Q1 profits

Higher selling prices for pork and improvement in hog market prices helped it return profit in its fiscal Q1, reported Smithfield Foods Inc. Wednesday (Sept 8).

 

CEO C. Larry Pope said the business environment was "very favourable in the pork segment and sharply improved in the hog production segment." He said his outlook for 2011 remains positive. "All parts of our business are profitable and we are focused on lowering our hog production segment cost model and capitalizing on our restructured pork group," he said.

 

The meat producer's reported net income of US$76.3 million, or US$0.46 per share, for the three months ended August 1 matched analyst expectations.

 

Smithfield's Virginia company lost US$107.7 million, or US$0.75 per share, in the first quarter a year ago.

 

Revenue rose 7% to US$2.9 billion from US$2.7 billion a year ago. Analysts expected higher revenue of US$3.07 billion.

 

Fresh pork revenue rose 10% to US$1.15 billion, whereas packaged meat revenue rose 5% to US$2.41 billion, helped by strong sales of the brands Curly's BBQ, Off the Bone Lunchmeats, Armour LunchMakers and Kretschmar Deli.

 

That segment is facing higher costs for raw materials such as corn, but the industry, including Smithfield, has offset those with higher selling prices. Average selling prices in the pork segment rose 15%.

 

The pork industry has been pressured for two years as a glut in supply kept prices low. But supply has been falling over the past two quarters.

 

In the quarter, the pork segment benefited from tighter protein supplies, with slaughter levels and freezer stocks lower compared from a year ago.

 

The company cuts jobs and closed factories in its pork segment to lower production and cut costs. Smithfield said that restructuring is basically complete and should save the company US$125 million annually.

 

In Smithfield's hog production segment, results benefited from fewer hogs marketed, which helped live hog prices rise 38%. Shares rose US$0.25 to US$16.55 in morning trading.