SMITHFIELD, VA. — Smithfield Foods, a subsidiary of China-based WH Group, posted higher net income in the second quarter despite market volatility and lower prices for pork. Results were helped by the company’s fresh pork and international business units.
For the second quarter ended July 3, Smithfield had net income of $137.8 million, which compared with $104.2 million posted in the second quarter of 2015.
Sales for the quarter were relatively flat at $3,492.6 million, which compared with $3,486.6 million in the year-ago quarter.
“Our most exciting growth prospect is the ongoing development of our packaged meats business,” the company said. “Although we have experienced meaningful and consistent improvement in packaged meats margins, we believe significant growth potential remains.”
Operating profit in the Fresh Pork segment, which consists of Smithfield’s U.S. fresh pork operations, increased by $73 million primarily as a result of higher fresh pork market values relative to hog prices, the company said.
Packaged Meats operating profit declined 2% to $172.9 million on lower sales volume.
“Operating profit remained relatively unchanged, but declined as a percentage of sales as we were not able to fully pass on a significant increase in raw material costs,” the company said.
Smithfield’s Hog Production business reported operating profit retreated $23.9 million on lower sales, which partially was offset by lower feed costs.
Operating profit in the company’s International business advanced by $4.4 million on improved results in Smithfield’s joint ventures in Mexico, the company said. Lower costs for feed were slightly offset by lower operating profit in Europe, which primarily was due to higher raw material costs.
Meanwhile, sales in the segment grew 5%, primarily due to an 11% increase in volume that partially was offset by the impact of foreign currency translation and lower average selling prices, the company said.
“The volume increase was driven largely by a 12% increase in hogs processed and a 16% increase in poultry processed,” the company noted. “Foreign currency translation lowered sales 3%, primarily due to a stronger U.S. dollar.
“We will continue to strengthen our consumer-focused marketing programs and promote innovation to improve our product mix toward branded, value-added products. We expect these actions to result in continued broad-based gains in packaged meats sales, volume, market share, distribution and margins.”
For the six months ended July 3, Smithfield had net income of $258.8 million, which compared with $201.2 million in 2015.Sales for first six months slipped to $6,798.9 million from $7.103.3 million a year ago. Smithfield attributed the result to lower average selling prices for domestic fresh pork, favorable hedging results and lower domestic meat volume. These factors partially were offset by higher average selling prices of domestic packaged meat products.