Smithfield Foods 2Q earnings, sales fall on weaker fresh pork volumes | VailDaily.com
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Smithfield Foods 2Q earnings, sales fall on weaker fresh pork volumes

NORFOLK, Va. – Smithfield Foods Inc., the world’s largest pork processor, said Thursday its fiscal second-quarter earnings fell 13 percent mainly due to weaker volumes in the fresh pork segment.The results missed Wall Street expectations and Smithfield shares fell 2 percent in morning trading.Net income fell to $44.7 million, or 40 cents per share, in the three months ended Oct. 29 from $51.6 million, or 46 cents per share, in the year-ago period, which included charges of 9 cents per share for the restructuring of East Coast pork processing operations.Sales slipped to $2.81 billion from $2.87 billion a year ago.Analysts had expected a profit of 46 cents per share on sales of $2.88 billion, according to a poll by Thomson Financial.Smithfield Foods’ shares fell 54 cents, or 2 percent, to $26.42 in morning trading on the New York Stock Exchange.”Times have been tough in this industry,” in the pork, beef and chicken sides of the business, C. Larry Pope, Smithfield president and CEO, said during a conference call with analysts.”Proteins have had a difficult time delivering any kind of reasonable return to their shareholders,” Pope said. “I am reasonably satisfied with this quarter given this environment that’s affecting all of us.”Fresh pork margins have remained weak, even during the fall, traditionally the best time of year for that segment, Pope said. Packaged meats margins also remained weak and difficulties in the beef industry persist, he said.Smithfield said results in the pork segment declined on lower fresh meat margins, with fresh pork volume down 7 percent from last year due to lower processing levels, a weak fresh meat environment and reduced livestock availability in the company’s East Coast pork processing operations.Packaged meats volumes were up 9 percent, helped by the acquisition of Cook’s ham business and the Armour-Eckrich branded meats businesses. Strong sales of branded packaged meats and ready-to-eat products at Cook’s and Armour-Eckrich helped produce double-digit growth rates in product categories such as ready-to-cook bacon, smoked hams, luncheon meats, smoked sausage, dry sausage, precooked entrees and precooked ribs. Excluding acquisitions, however, packaged meats volumes were down 4 percent.Smithfield said beef segment results increased substantially, reflecting higher margins in cattle raising and improved beef processing performance.The company’s international segment returned to profitability in the quarter, reflecting gains from its recently formed joint venture, Groupe Smithfield, and improved results in Poland. Groupe Smithfield, a 50/50 venture between Smithfield and Oaktree Capital Management LLC, acquired the European meats business of Sara Lee Corp. in August.Pope announced that Daniel G. Stevens will step down as chief financial officer effective Jan. 1 to become senior financial adviser to Groupe Smithfield. Pope said Stevens, who now is on Groupe Smithfield’s board, has extensive European experience.Robert W. Manly, executive vice president, will serve as interim chief financial officer.Smithfield said the recent rise in grain prices will increase growing costs and likely affect margins if they persist. It said rising prices for corn, a livestock feed, and other costs will continue to affect live production results.”This is an industry with very thin margins, both in red and white meat. As such, any significant cost increases will have to be passed through in selling prices relatively quickly to maintain margins,” Pope said in a statement.For the first six months of the fiscal year, Smithfield earned $69.3 million, or 62 cents per share, down from $100.6 million, or 90 cents a share, a year ago. Revenue fell to $5.58 billion from $5.8 billion a year ago.—On the Net:Smithfield Foods: http://www.smithfieldfoods.com


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