Smithfield Foods Inc, pork and meat producer, has announced on Thursday last week that fiscal second quarter profit dropped by 61%.
Higher costs, lower hog prices and hefty charges related to a swine fever outbreak have all negatively affected the organisation’s earnings. For the financial quarter ended October 28, net income fell 13 cents per share toUS$17.4m, from US$44.7m or 40 cents per share last year.
Swine fever losses
The above results included around US$13m in write-downs due to the liquidation of livestock inventory and clean-up costs associated with an outbreak of swine fever at several Romanian pig farms and a loss of US$25m on account of foreign currency fluctuations.
Revenue, however, rose in the second quarter of 2008 to US$3.46b from US$2.80b, led by a 28% increase in sales in the pork division.
In the company’s smaller pig production unit, sales rose 33%, but the division’s profit declined due to higher pig raising costs and lower live pig market prices.
On the upside, profit margins for packaged meat increased 37% for its pre-cooked bacon, sausage and ham products.
Larry Pope, president and chief executive, commented on the results stating that “the highlight of the quarter was the improvement in packaged meat margins because of an improved product mix, but the reduction in earnings, was almost entirely in the pig production unit”.
For the future, he predicts that “in the short term, losses will be experienced in the pig production market as we move into our fourth fiscal quarter. Fresh pork margins will remain healthy and the packaged meat business expects continued strong performance”.