Challenges in Smithfield’s fresh pork and hog production business units pushed Smithfield Foods’ earnings lower during the quarter. For the quarter ended July 29, the company recorded net income of $61.7 million, equal to 40 cents per share on the common stock. The result compared unfavorably to the same period of the previous year when net income was $82.1 million, or 50 cents per share.
Sales for the quarter were $3,091.3 million, a very slight decline compared with the first quarter of fiscal 2012 when sales were $3,094.2 million.
“We did not have a good quarter in fresh pork,” Pope said. “As most of you know, the summer months are generally the worst months of the year for fresh pork, and that was the case this year.”
The company reported this year’s margins below the normalized range at a loss of $2 per head due to an 8 percent decline in the US Department of Agriculture pork cutout which outweighed a 4 percent drop in live hog market prices.
Challenges in Smithfield’s export business resulted in part from “a couple of plant de-listings,” which Pope said has been resolved and shipments have resumed for the most part. “While I’m not nearly satisfied with this quarter’s results, I am not really worried about fresh pork and fully expect fresh pork profitability to be fine for the year.”
On the other hand, Smithfield’s packaged meats results set a record for any first quarter in the company’s history. This segment, which includes its 12 core brands, continues to be the focus of the management team as the company saw growth in its branded business (7 percent) and 4 percent overall.
“I can’t say enough things about our packaged meats business,” Pope said. “It is very solid and we continue to believe that we still have significant upward potential in this business.”
Looking ahead, company officials are looking forward to bringing a new processing facility online in North Carolina, where the company will manufacture coextruded hot dogs that will be pasteurized in the package. The $80 million plant is expected to begin operating in the fourth quarter of this fiscal year.
“We believe this new plant will be the most efficient and food-safe hot dog plant in the world,” said Pope. “This should further enhance our margins and deliver a superior food-safe product in this important product category.
“Overall, this was a solid quarter in a very volatile period, and while fresh pork was weak, I am not worried about it. Hog production costs are under control and our packaged meats business is on a roll.”
