Smithfield profits jump on strong demand

by Editor fleischwirtschaft.com
Wednesday, August 13, 2014
Photo: Smithfield Foods, Inc.

Smithfield Foods, Inc. reported a surge in second quarter earnings as strong domestic and international demand for pork and higher prices for hogs combined to lift profits.

For the second quarter ended 29 June, 2014, the company reported net income of $142.9 mill. compared to $32.4 mill. a year ago. Sales gained 14% to reach $3.8 bn.

Smithfield, a subsidiary of Hong Kong-based WH Group Ltd., changed its reportable business segments. The company's former Pork segment now consists of two reportable segments, Fresh Pork and Packaged Meats. Starting with the second quarter, the company's reportable segments are Fresh Pork, Packaged Meats, Hog Production, International and Corporate.

Smithfield's Hog Production segment set an all-time record for operating margins, according to the company. Operating margins were 15%, or $37 per head. Tight supplies caused by the impact of porcine epidemic diarrhoea virus (PEDv) supported exceptionally high prices, while hog raising costs declined 3% to $66 per cwt.

Operating margins in the Fresh Pork segment advanced 2% to $5 per head on tight supplies of hogs. The Company processed 8% fewer hogs, but heavier weights offset volume declines.

The company's Packaged Meats Business recorded operating margin gains of 6%, or 15 cents per pound. Notable increases were in bacon, hams, hot dogs and dry sausages, the company said. Ham volume jumped due to the later timing of Easter.

Smithfield noted gains in retail and foodservice sales volume and dollars. The company's Smithfield, Kretschmar, Curly's, Carando and Cook's brands delivered volume growth at retail. Smithfield brand bacon and Curly's BBQ expanded market share, while the Company expanded distribution of Eckrich cooked dinner sausage, Smithfield and Farmland bacon, Farmland ham steaks, Curly's BBQ and Armour portable lunches.

Looking ahead, C. Larry Pope, president and CEO, said market fundamentals continue to be supportive of Smithfield on a number of fronts. Domestic demand has been strong, and demand from other countries remains strong despite a ban of US pork by Russia. Pope said These factors, combined with lower domestic protein production, should support high prices for hogs and pork for the remainder of 2014 and beyond.

Synergies with Smithfield parent Company WH Group are taking hold. Pope said Smithfield branded premium chilled fresh pork sold at Smithfield kiosks in mainland China has reported strong sales and customer traffic.
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