Smithfield, the US's largest hog producer and pork processor, has released it recent quarterly figures with a loss of $103.1 million, or 72 cents a share, in contrast to a profit of $54.5 million, or 41 cents a share, in the period last year. Results in the most recent quarter were hurt by higher feed costs and a revamping charge.
Sales in the period, which ended Feb. 1 and was the third quarter of Smithfield's fiscal year, rose 7%, to $3.35 billion, from $3.12 billion, helped by an extra week in this year's quarter, but fell just short of analysts' estimates of $3.41 billion.
Fresh pork volume was flat, while packaged meat volume fell 4% from last year as consumers reacted to price increases.
C. Larry Pope, the chief executive, said he expected a recent decline in grain prices to help the packaged meat division. He said a recent overhaul, plant improvements and the company's focus on packaged meats would help results.
Record packaged meats results were offset in the pork segment by $84.8 million ($.38 per diluted share) of restructuring charges and weaker fresh pork margins. Fresh pork volume was flat on a comparable basis to last year.
Total packaged meats margins expanded substantially despite a modest volume decrease of four % compared to a year ago due to price discipline and continued emphasis on operating efficiencies.
Export demand in several markets was significantly stronger than a year ago. Third-quarter exports last year included sales of 70 million pounds of pork carcasses to China, representing 22 % of total exports. Even though there were no similar sales this quarter, export sales were down only two % from the record levels of last year. Excluding the incremental carcass sales last year, export sales rose 26 %. Smithfield's top five importing countries, China/Hong Kong, Japan, Mexico, Korea and Russia, represent over 80 % of total exports. With the exception of Russia, exports to these countries increased between 11 % and 75 %.
Hog production losses continued due to extremely high feed costs. Domestic raising costs increased to $62 per hundredweight versus $49 per hundredweight in the prior year. Live hog market prices in the U.S. were $40 per hundredweight compared to $37 per hundredweight last year. Grain prices have fallen dramatically from record high levels of last summer. While some thought last year that the industry might run out of corn, Smithfield locked in availability through the end of this fiscal year at price levels over $6 per bushel, well above current market prices. Pig raising costs will begin to reflect lower corn prices beginning in the first quarter of fiscal 2010.
Murphy-Brown, Smithfield's hog production subsidiary, has liquidated 10 % of its United States sow herd in the last year. This has resulted in a reduction of 100,000 sows and which will result in production of approximately two million fewer market hogs annually, beginning in fiscal 2010.
• Smithfield Foods