High hog prices boost Smithfield profits

High hog prices boost Smithfield profits

SMITHFIELD Foods, a subsidiary of WH Group Ltd., released its first-quarter 2014 financial results, which showed sales at $3.4 billion, up 3% from last year. Net income was $105.3 million, compared to $18.2 million last year.

The overall operating profit for the pork division was $180.2 million, a 40% increase from 2013. C. Larry Pope, Smithfield president and chief executive officer, credited the strong returns to record-high hog prices.

Hog production operating margins rose to 1%, or $2 per head. Year over year, live hog market prices increased 16% to $71/cwt., while costs to raise hogs declined 4% to $65/cwt.

Smithfield sold fractionally fewer hogs, but heavier market weights offset the shortfall. Results reflected ongoing risk management activities to counter market volatility.

International operating margins improved to 10% on strong hog production results both in Poland and Romania. Sales in the company's meat operations were very strong, with a double-digit volume gain across the entire international meat complex. Operating results also improved markedly in Smithfield's joint venture operations in Mexico.

Pope noted that "2014 is off to a great start, with record first-quarter earnings. Looking forward, continued strong fundamentals, driven by reduced hog and pork supplies, organic growth opportunities, as well as synergies with WH Group, should fuel significantly improved year-over-year results.

"Hog production volumes will be lower due to porcine epidemic diarrhea virus, pushing hog and pork prices higher," he added. "The combination of lower corn costs and higher hog prices will generate very strong hog production margins."

Volume:86 Issue:22

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