Smithfield Foods witnesses 91% decline in Q2 earnings

Meat supplier, Smithfield Foods, sees a 91% drop in fiscal second-quarter earnings.

The company recorded a large debt-extinguishment charge, while revenue edged down.

Smithfield - whose brands also include John Morrell, Armour and Farmland - has come under pressure recently from higher supplies and feed costs and weak domestic retail demand, although the company has maintained that exports have remained strong.

For the quarter ending October 28, the largest US pork producer by volume posted a profit of US$10.9 million, or US$0.07 per share, versus a year-ago profit of US$120.7 million.

Excluding one-time items, including US$120.7 million in early debt-extinguishment charges, earnings declined to US$0.61 from US$0.76. Sales slipped 2.6% to US$3.23 billion.

Total pork sales, the biggest contributor to Smithfield's revenue, edged down 1.9%. The hog-production segment's sales fell 6.5%, while Smithfield's international business recorded a decline of 8.3%.

Gross margin narrowed to 11.7% from 12.7% even as input costs fell 1.5%.

Smithfield expects hog prices to recover seasonally in the second half of the fiscal year and that analysts forecast record pork exports in 2013 "as lower global pork production and higher pork prices - especially in the EU--should bolster demand for US pork."