Smithfield to focus on 'maximizing' its businesses

Smithfield to focus on 'maximizing' its businesses

- Brand volume and market share growing. - Production costs and pork supplies hurt hog and fresh pork businesses. - International oper

SMITHFIELD Foods Inc. has reported increased net profits for its fiscal 2013 third quarter, attributing growth in its packaged meats business as the company continued to execute its plan to transition to being a more value-added packaged meats company.

Smithfield said it achieved growth in volume in nine of its 12 core brands, especially its Smithfield, Eckrich, Farmland and Margherita labels. The company said it broadened distribution of core brands and gained market share in the bacon, dinner sausage, dry sausage and ham steak categories.

Smithfield also cited "strong contributions" from international operations.

However, losses taken for hog production and lower earnings for fresh pork held back the company's nine-month results.

Smithfield's results for the third quarter (November 2012 through January) and year to date are shown in the Tables.

For its hog production segment, which took a loss of $64.5 million for the quarter, Smithfield said the quarter could have been worse, pointing to a commodity cost mitigation strategy to buy corn and soybean meal on the futures markets. Accordingly, the company said it produced results that were better than the industry average.

In the third quarter, Smithfield said hog prices decreased 2% to $60/cwt., live cash basis, from the year before, while costs of production rose 7% to $68/cwt.

The company said it continues working to mitigate commodity costs and expects improved margins in 2014.

For its pork segment, which includes its fresh pork and packaged meats businesses, Smithfield said fresh pork margins were solid at 4%, or $7 per head, but were lower than the year before as large pork supplies across the industry pushed the cutout down 5%.

The company said domestic retail sales volume saw a double-digit increase, and export sales volume was up across a number of markets.

Smithfield said it continues to focus fresh pork toward an improved mix of branded, value-added products.

Smithfield said margins for its packaged meats were 7%, or 15 cents/lb., on strong volume growth for a number of brands, key product categories and trade channels, and that growth was driven by greater investments in innovation and marketing.

The company said sales of bacon, hams, sausage and precooked entrees were "notably robust."

For the international operations, Smithfield said its hog operations in Eastern Europe continued to perform strongly, and earnings for packaged meats grew in Poland and Romania. However, the company said high raw material costs and recessionary pressures adversely affected its Campofrio packaged meats business in Western Europe.

Smithfield said Eastern European fundamentals are positive.

In the U.S., decreased per capita supplies of protein should be supportive to pork demand and pricing for the remainder of fiscal 2013 and into fiscal 2014, chief executive officer and president C. Larry Pope noted.

Consumers are dealing with higher energy prices and taxes, but pork remains competitively priced in retail stores compared with other proteins, which should give retailers "excellent feature opportunities this spring and summer," he said.

Accordingly, Smithfield will continue its plan to grow its businesses and improve revenues, concentrating on "maximizing" existing businesses through increased innovation, marketing and capital investment, he said.

The company will additionally "target" branded and value-added acquisitions, especially in consumer packaged meats, Pope said.

Smithfield, headquartered in Smithfield, Va., is the largest hog producer and largest pork processor in the U.S. It reported fiscal 2012 sales totaling $13.094 billion.

 

1. Smithfield Foods earnings and sales*

 

-Third quarter-

-Nine months-

 

2013

2012

2013

2012

Sales (billion $)

3.583

4.478

9.900

9.885

Earnings (million $)

81.5

79.0

154.1

281.8

Earnings per share ($)

0.58

0.49

1.03

1.72

 

2. Smithfield Foods operating results (million $)*

 

-Third quarter-

-Nine months-

Sales

2013

2012

2013

2012

Hog production

837.9

761.8

2,300.7

2,296.9

Pork segment

 

 

 

 

Fresh pork

1,245.2

1,303.2

3,743.5

3,849.8

Packaged meats

1,757.9

1,689.5

4,580.1

4,515.0

Total pork

3,003.1

2,992.7

8,323.6

8,364.8

International operations

393.1

360.4

1,098.5

1,126.5

Income

 

 

 

 

Hog production

(64.5)

(6.6)

(74.0)

127.0

Pork segment

 

 

 

 

Fresh pork

54.0

78.5

136.7

210.1

Packaged meats

125.9

117.4

356.1

293.7

Total pork

179.9

195.9

492.8

503.8

International operations

43.7

6.2

100.4

23.5

For the quarters ended Jan. 27, 2013, and Jan. 29, 2012.

Source for Tables: Smithfield Foods Inc.

 

Volume:85 Issue:11

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