Smithfield income down 76% in quarter

by FoodBusinessNews.net Staff
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SMITHFIELD, VA. — Rising costs and adverse market conditions contributed to a 76% decline in net income for Smithfield Foods, Inc. during the second quarter.

For the quarter ended Oct. 26, Smithfield had net income of $4.2 million, equal to 3c per share on the common stock, down from $17.4 million, or 13c per share, during the same quarter of the previous year.

Sales for the quarter were $3,147.1 million, down 15% from $2,747 million during the same quarter of the previous year.

"Our pork business continued to perform exceptionally well even though raw material costs were 15% higher than a year ago," said C. Larry Pope, president and chief executive officer. "These results were offset by unprecedented adverse conditions in the hog production industry. Raising costs were at record high levels as we were consuming high-priced grain purchased last summer. Meanwhile, hog prices were well below our raising costs."

The Pork segment had an operating profit of $93.4 million, up 48% from $62.9 million during the same quarter of the previous year. Sales for the segment were $2,590.1 million, up 11% from $2,343.5 million during the same quarter of the previous year.

The Hog Production segment had an operating loss of $58 million compared with an operating income of $18.6 million during the same quarter of the previous year. Sales for the segment were $748.8 million, up 22% from $614.8 million during the same quarter of the previous year.

For the six months ended Oct. 26, Smithfield sustained a loss of $8.4 million compared with income of $72 million during the same period of the previous year. Sales for the six months were $6,288.9 million, up 17% from $5,363.7 million during the same period of the previous year.

"We will experience slightly lower feed costs as we move through the third and fourth quarter," Mr. Pope said. "However, they will continue to be at high levels compared with prior years. Herd liquidation in North America and throughout the world, together with lower production of poultry and beef, should strengthen all protein prices going forward. According to futures markets, hog production should turn profitable in the first quarter of fiscal 2010."

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