INSIGHT: Smithfield bullish despite Q1 losses
Smithfield Foods insisted today (8 September) that its business is well-positioned to benefit when the live hog industry picks up, despite the US meat producer posting an almost three-fold jump in first-quarter losses.
Losses from continuing operations totalled US$107.7m, up from $29.1m in the prior year, the company revealed this morning (8 September).
Although Smithfield booked "record profits" at its processed meats unit and said the restructuring of its pork business was "on-time" and "on-budget", losses at the live hog business weighed on the group's first-quarter results.
Speaking during a conference call, CEO Larry Pope said that the hog business continued to suffer from "record high" corn prices and "historically low" hog selling prices, the global recession, a "reactive" and "politically motivated" export market, the impact of swine flu, a "devastating" fire and a "government working against us" through its biofuels programme.
Nevertheless, Pope dispelled reports that the company is planning to spin-off its hog unit.
"I remain absolutely committed to this business. There have been some rumours out there that Smithfield will spin-off its hog business. That is absolutely not true. We want to reduce our exposure due to volatility," he commented.
According to Pope, while Smithfield expects conditions in the live hog industry to remain poor for the next "several quarters", conditions will ultimately improve.
"Something has to happen, something has to change. This trend will not continue, it cannot continue, or you will only find the pig in the zoo because you won't find it on any farms," he warned.
Looking at the rest of the business, Pope said he was "extremely optimistic" about the packaged meats unit, while the restructuring of the group's pork division "is going better than we thought it would" and has "positively impacted the quarter".
"I am extremely please with what this management team has done. This company is managing what it can manage and I think the future is extremely bright. As soon as live hog production returns to normal levels we are poised to benefit. I am pleased with where we are in spite of the results we have posted this morning," Pope insisted.
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