Smithfield Foods Inc. reported results for the third quarter of fiscal 2010 with earnings of 22 cents per share, above analysts estimates of 19 cents and were also up compared to a loss of 75 cents in the prior-year quarter.
The third quarter also saw the company earning an operating profit of US$96.5 million, compared to a loss of US$135.5 million in the prior-year quarter.
According to Zacks Investment Research, net sales for the quarter declined 13.8% year-over-year to US$2.9 billion, attributable to declines in three of the five operating segments of the company. The Pork segment contracted 15.1%, Packaged Meat declined 18.3% while the Other segment declined 0.7%. These were partially offset by increases in the International segment (+3.0%) and Hog Production (+4.7%).
Net sales in the Pork segment declined as fresh pork operating margins were lower compared to the year ago quarter, due to reduction in hog slaughter levels that negatively impacted results. Furthermore, fresh pork volumes in the third quarter declined 7% year-over-year.
According to Zacks, export volume in the third quarter were also flat compared to the same period last year, despite closed export markets in China and Russia, both of which are important markets for US pork.
Revenues in the packaged meats segment also declined year-over-year due to planned volume decreases. This was the result of plant closures in the Pork group restructuring plan.
The International segment witnessed revenue growth driven by strong performance in Poland and brand growth as sales volumes increased 24%. Revenue growth in Hog Production was driven by a 12% improvement in live hog market prices in the U.S. and a 16% reduction in domestic raising costs.
American live hog market prices increased to an average of US$44 per hundredweight compared to US$40 per hundredweight in the year-ago period. Domestic raising costs decreased to US$51 per hundredweight from US$61 per hundredweight in the prior year. Furthermore, the company's international hog production operations in Poland, Romania and Mexico also delivered strong performance.
According to Zacks, For fiscal 2011, management expects hog production to increase dramatically year-over-year. In addition, pork segment is also expected to deliver a strong performance, owing to the restructuring plan that will be complete.