US meat processor Smithfield Foods has reported a rise in earnings for the fourth quarter and year ended 1 May 2005, bolstered by a good performance in the hog sector.
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Net income for the fourth quarter was $85.4m versus income from continuing operations in the same period last year of $71.1m. Sales in the fourth quarter were $2.9bn compared to $2.5bn.
For the full year the company reported record results with net income of $296.2m, compared to income from continuing operations of $162.7m the year before. Including a $49m on sale and the results of operations of Schneider last year, net income was $227.1m. Fiscal 2005 sales were $11.4bn, compared to $9.3bn a year ago.
Capitalizing on a 29% in live hog prices year over year, the hog production segment recorded earnings well above a year ago. For the full year, raising costs were slightly higher than fiscal 2004 due to higher grain costs during the first half.
In the pork segment, higher raw material costs depressed margins. Fresh meat volume increased 14% with the full year contribution of Farmland Foods. Excluding the incremental volumes of Farmland and the impact of the additional week last year, fresh meat volumes were up one percent. Processed meats volumes also increased 14% for the year or three percent after adjusting for the incremental Farmland volumes and the additional week.
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By GlobalDataExport demand was strong throughout the year, with volume growing 30%. Case-ready pork volume increased 34%, excluding Farmland. In further processed meats, the company saw strong growth in its pre-cooked bacon, pre-cooked entrees and dry sausage. The bacon strategy the company launched a year ago is proceeding well, expanding capacity by more than 12 percent in this fiscal year. Smithfield Deli Group, formed in 2002, continued to grow several times faster than the industry with strong performances in both branded and private label products. The deli group’s pre-cooked segment volume also experienced double-digit growth.
Smithfield’s beef segment reported a modest loss for fiscal 2005, as volume declined 10% and unsatisfactory industry conditions continued throughout the year. International earnings improved slightly while operating profit in the turkey operations in the other segment more than doubled.
Joseph W. Luter, III, chairman and CEO, noted that Smithfield achieved record results in a year in which the company’s beef operations were not profitable. “The substantial investments we have made to become vertically integrated have paid big dividends. Through our vertical integration strategy, our pork processing and hog production operations combined to deliver an outstanding year,” said Luter.
“Importantly, we made substantial progress in our continuing priority of improving and growing the value-added pork segment. We have invested to add considerable processed meats capacity,” Mr. Luter said. “Our emphasis on deli and case-ready also is paying off. As raw material prices decline somewhat, we will be positioned for significant earnings growth in this sector.”
