December 11, 2009

Smithfield Foods posts loss in Q2

Smithfield Foods Inc. posted a fiscal second-quarter loss, but the red ink from continuing operations lessened as results improved at all the meat processor's businesses except for its hog-production unit, where losses widened on sharply lower prices.

Producers' losses had deepened amid a series of hurdles starting with record-high feed costs in summer 2008, followed by the economic crisis last fall and the emergence of the AH1N1, initially called swine flu, in April.

Smithfield president and chief executive Larry Pope says the company restructuring plan "is in full swing" and expects the second half of its fiscal year to be profitable.

Smithfield, one of the world's largest pork producers, has been trimming its hog herd for some time to curb oversupply. The company, which has cut its US herd by 13%, expects the hog herd to be down by more than 2.2 million by the next fiscal year.

Pope believes that further liquidation is needed to reach a balance in supply and demand despite the herd reductions and farm closings.

The company which includes brands like John Morrell, Farmland Foods and Butterball, reported a loss of US$26.4 million, or 17 cents a share, compared with a prior-year profit of US$1.7 million, or one-cent a share. The year-earlier loss from continuing operations was 23 cents. Revenue decreased 14% to US$2.69 billion.

Analysts polled by Thomson Reuters most recently forecast a loss of 39 cents on revenue of US$2.71 billion.

The pork business, by far its biggest segment, saw an 86% earnings surge as profit more than tripled at its packaged-meat business. Fresh-pork profit continued to decline.

The meat-packing industry may be shaken up further by Brazilian food giant JBS SA's plans to acquire chicken producer Pilgrim's Pride Corp., which were approved by a bankruptcy judge earlier. JBS has been growing through acquisitions in recent years, including its purchase of Smithfield's beef-processing unit last year.

Shares closed Wednesday at US$16.86 and didn't trade premarket. The stock is up nearly 20% this year.