Higher costs pressure Smithfield Foods income

by Staff
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SMITHFIELD, VA. — Income for Smithfield Foods, Inc. was down 61% during the third-quarter on higher costs and charges related to its share of Spanish processed-meats company Campofrio.

For the quarter ended Jan. 29, the company had an income of $79 million, equal to 49c per share on the common stock, which compared with an income of $202.6 million, equal to $1.22 per share, during the same quarter of the previous year. Sales for the quarter were $3,478.3 million, up 9% from $3,186.2 million during the same quarter of the previous year.

“I am very pleased to report another quarter of strong profitability and in particular the progress we have made in improving the quality and consistency of our earnings,” said C. Larry Pope, president and chief executive officer. “Notably, our year-to-date adjusted earnings closely tracked last year's record results.

“I am very encouraged by the consistency of our packaged meats margins in periods of both high and low cost raw materials. We are beginning to realize the benefits of our long-term strategy to intensify our consumer-focused marketing programs, and I applaud the efforts of our sales and marketing team who produced consistently solid margins in our packaged meats business while delivering share and distribution growth in several of our core brands and strategic product categories. Although packaged meats volumes declined slightly, we achieved strong sales and volume growth in the third quarter in our Armour, Curly's, Farmland, Gwaltney, John Morrell, and Kretschmar brands.”

During the quarter the Fresh Pork segment had an operating profit of $78.5 million, down 40% from $130.3 million during the same quarter of the previous year. Sales for the segment were $1303.2 million, up 19% from $1,093.1 million during the same quarter of the previous year.

The Packaged Meats segment had an operating profit of $117.4 million, down 6% from $124.5 million during the same quarter of the previous year. Sales for the segment were $1,689.5 million, up 6% from $1,591.6 million during the same quarter of the previous year.

“Favorable market conditions continued to support strong fresh pork profitability,” Mr. Pope said. “Supply and demand remained well in balance, as healthy global demand for pork, particularly from Asia, drove double-digit increases in both export volume and dollars. Although the hog production business recorded a loss for the quarter due to seasonal declines in hog prices, solid fundamentals remained intact. As anticipated, international segment profitability improved, producing record third quarter results after excluding the Campofrio charge.”

For the nine months ended Jan. 29 the company had an income of $281.8 million, equal to $1.73 per share, down 33% from $422.6 million, equal to $2.55 per share, during the same period of the previous year. Sales for the nine months were $9,885.1 million, up 9% from $9,086.3 million during the same period of the previous year.

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