Annual report Smithfield Foods reports record 2014 results

by Editor fleischwirtschaft.com
Tuesday, March 31, 2015
Photo: Andreas Hermsdorf / pixelio.de

Smithfield Foods, Inc., a wholly owned subsidiary of WH Group Limited (HKEX:288), reported record 2014 results. All comparisons are to the fourth quarter and full year 2013. Sales for the fourth quarter of 2014 were $4.1 billion, up 5%. Net income was $152.6 mill., compared to net income of $34.7 mill. last year. Sales for 2014 were $15.0 bn., up 8%. Net income was $556.1 mill., compared to net income of $120.7 mill. last year.
Fresh pork operating margin improved to 2%, or $3 per head. Tight supplies combined with resilient domestic and export demand pushed the USDA cutout 19% higher and offset a comparable increase in live hog prices. Export sales volume and dollars increased with strong gains in a number of key markets, including China. Importantly, branded volume and sales dollars were higher. The company processed 4% fewer hogs, but heavier weights compensated for part of the volume decline. Foodservice sales volume and dollars increased.

Packaged meats operating margin increased to 6%, or $.16 per pound. Sales grew 10% to a record $7.2 bn. The company achieved strong volume growth across a number of key product categories, core brands and trade channels, although overall volume was flat. Bacon, hot dog, spiral ham, precooked entree and sausage volume increased.

The company achieved notable distribution growth in the following brands and product categories: Smithfield bacon, Smithfield ham steaks, Smithfield marinated pork, Eckrich cooked dinner sausage, Farmland bacon, Farmland ham steaks, Armour portable lunches, Nathan's hog dogs and Margherita dry sausage.

Hog Production operating margin rose to 10%, or $23 per head. The company achieved meaningful operational improvements and results were also bolstered by the positive effect of PEDv on live hog prices combined with lower input costs. Year over year, live hog market prices increased 20% to $79 per hundredweight, while raising costs declined 6% to $64 per hundredweight. The company sold 10% fewer hogs, but heavier market weights offset some of the shortfall.

International operating margin increased to 9%. Operating margin for Smithfield Europe was 6% because of higher sales volume and lower raw material costs. Results also improved due to higher equity income primarily from the company's Mexican joint ventures.

In February, Smithfield announced an organisational realignment and key senior management appointments that unify all of its independent operating companies, brands, marketing, and more than 48,000 employees around the world under one corporate umbrella to accelerate the company's growth and further its mission of providing "Good food. Responsibly." Smithfield's business operations will now be organised in alignment with the company's customers and reporting segments and managed as four divisions - Packaged Meats, Fresh Pork, Hog Production and International. Following the realignment, the Packaged Meats Division will include all of the company's packaged meats business previously operated under Smithfield Farmland and John Morrell Food Group within a single, cohesive division. The company's Fresh Pork division will encompass the former Smithfield Farmland fresh pork operations, and the company's Hog Production and International businesses will retain their existing structure and leadership while operating under the new divisional structure.
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