Smithfield Foods has “structurally changed” as a business through its focus on packaged meats, the head of the US meat giant has claimed in a bid to convince investors of the future direction of the business.
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Better profits from Smithfield’s packaged meats business helped the company offset ongoing challenges in its hog division and book lower second-quarter losses than a year ago.
Speaking to analysts, Smithfield president and CEO Larry Pope (pictured) said packaged meats was “propelling this company’s profitability”.
Smithfield has had a turbulent 18 months. Results have been affected by a weak hog market, while the company has had to fend off speculation about the financial health of the business.
However, the company has refinanced its loans and during the summer launched a US$500m rights issue to pay down debt.
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By GlobalDataPope said Smithfield had “turned the corner” financially and noted that the group had made an operating profit during the second quarter of $1.8m.
The Smithfield boss also pointed to a more-than tripling in packaged meats profits as evidence that, strategically, the business was moving in the right direction.
“These numbers are extraordinarily good numbers. I know I sound like a broken record, saying again and again and again and again that this is the focus of the company that I have so much trouble getting so many people on Wall Street to pay attention to,” Pope said.
He did, however, warn that margins from Smithfield’s packaged meats business are likely to fall “as the P&L moves from the packaged meats to the hogs” but he added: “I am fully convinced that what we have done in this end of the business has structurally changed who we are as an organisation.”
Losses from Smithfield’s hogs division more than almost trebled during the quarter as over-supply throughout the industry continued to hit the business.
Pope tried to remain upbeat about the hogs market, insisting that Smithfield had played its part in to reduce its herd and added: “Our people believe that the hog market is turning and I think that’s favourable for Smithfield.”
Outside the US, Pope said Smithfield’s international business was “performing well” and highlighted that its Polish operations were having a “good year”.
Nevertheless, Campofrio, the European packaged meats group in which Smithfield owns a 37% stake, was still being affected by the downturn in certain markets.
“Our Campofrio investment in Western Europe has turned some. It’s still not where that needs to be. There’s a lot of opportunity still on that side of the investment as Western Europe wrestles with a recession that’s even deeper than the recession in the United States.”
