Smithfield Foods: Record Q2 results, sales up 14%
Smithfield Foods, Inc., a wholly owned independent subsidiary of WH Group Limited reported record 2014 second quarter results. Sales for the second quarter of 2014 were $3.8 billion, up 14%. Net income was $142.9 million, compared to net income of $32.4 million last year.
All comparisons are to the second quarter of 2013.
• Net income +341% to second quarter record high of $142.9 million
• Sales +14% to $3.8 billion
• Consolidated operating profit +190% to $260.2 million
o Fresh Pork operating profit +257% to $29.7 million
o Packaged Meats operating profit solid at $97.5 million
o Hog Production operating profit +322% to $129.0 million; margins record high
o International operating profit +869% to $33.9 million
• Reduced interest expense 10%
C. Larry Pope, president and chief executive officer, commented, "Our record results and strong earnings growth in the second quarter were driven by several key factors. Fundamentals were very supportive, particularly in our hog production segment, with tight supplies due to PEDv and strong demand both domestically and internationally, which pushed hog production margins to record levels. At the same time, our management is intensely focused on implementing our organic growth plan, which is working. We have restructured and streamlined our fresh pork and packaged meats operations and are benefiting from our long-term strategy to intensify our consumer-focused marketing programs and foster innovation to improve our product mix toward differentiated, branded and value-added products. The continued successful execution of this plan yielded consistently solid margins in our packaged meats business again this quarter, as well as gains in volume, market share and distribution across a number of our core brands and key product categories. Our strong performance was also propelled by our continued close collaboration with WH Group and Shuanghui, our sister company in China, to achieve synergies."
Fresh pork operating margins improved to 2%, or $5 per head. Tight supplies combined with resilient domestic and export demand pushed the USDA cutout 30% higher and offset a comparable increase in live hog prices. The company processed 8% fewer hogs, but heavier weights compensated for a significant portion of the volume decline. Foodservice sales volume and dollars increased.
Packaged meats operating margins were 6%, or $.15 per pound. Volume grew 6% with notable increases in bacon, hams, hotdogs and dry sausage. Ham volume was significantly higher owing to the later timing of Easter. The company delivered normalised margins and volume growth in the face of an unprecedented rise in raw material costs.
International operating margins grew to 8% primarily because of significantly higher earnings in the company's vertically integrated operations in Poland and Romania. In both countries, lower grain costs drove a double-digit drop in raising costs and more than offset a decline in live hog prices, leading to considerably improved hog production profitability. At the same time, lower live hog prices and enhanced pricing discipline fueled better fresh meat earnings. Equity income from the company's Mexican joint ventures also increased on higher hog prices resulting from PEDv in Mexico.
For an outlook and more info: Smithfield Foods
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