Smithfield Foods Inc., a wholly owned subsidiary of WH Group Limited, recently released its first quarter financial results for 2015, revealing an 8% decrease in profits which the company said was attributable to lower prices and a stronger U.S. dollar.
The company reported that international sales decreased 12% due primarily to changes in foreign exchange rates and that the foreign currency translation negatively impacted operating profit by approximately $2.4 million due to a stronger U.S. Dollar.
However, chief financial officer Ken Sullivan pointed out that first quarter results of $97 million would have “effectively equaled” the record $105.3 million first quarter of 2014 had the company not charged $12.8 million for debt repayment.
Total sales increased to $3.616 billion from $3.422 billion during the same period in 2014, which Sullivan said was largely attributable to a particularly strong quarter for the packaged meat division. Operating profits were $188.2 million compared to last year’s $196.4 million.
“All things considered, a good quarter,” Sullivan said.
Sales increased primarily as a result of higher sales volume of domestic packaged meats products due to the timing of Easter. Gross profit increased primarily as a result of higher sales volume of domestic packaged meats products, lower pork processing raw material costs and lower hog production costs.
Smithfield’s packaged meat division realized a 42% increase from $121.3 million in Q1 2014 to $172.5 million in Q1 2015.
Sullivan said the company expects a strong year for the packaged meat division.
Fresh-pork profits fell 44% from $58.9 million last year to $33.2 million during Q1 2015. The decrease was attributed to the West Coast port situation and a larger hog inventory. However, Sullivan said Chinese demand could help fresh pork rebound during the remaining quarters.
Smithfield reported hog production lost $6.4 million, compared to a $9.5 million gain in Q1 2014. Sullivan said Q1 and Q4 are typically weaker quarters for the hog industry, adding that Q1 2015 results were considerably better than industry averages because of the company’s significant hedging contributions.